The Minister has not given us very much information or deigned in any way to take cognisance of any of the general questions that were put to him with regard to the situation during the last few days. There is one rather important matter to which I should like the Minister to address himself, at any rate, on this Bill, which, I think, gives him power to do the necessary borrowing of the moneys he may require. The Minister told us during his speech to-day that we are concerned here with an Irish problem and not with a British problem. There is no person in this House who has addressed himself to this question, if I might exclude, without prejudice, some of the Ministers who have spoken, who does not realise that what we are trying to deal with is an Irish problem.
We find that what is happening here in dealing with an Irish problem is that the most important part of the policy applied by the British Government to their problem and for the purpose of dealing with conditions in England, is part of the machinery which the Government are accepting here for the purpose of dealing with an Irish problem, which is an entirely different one. I asked the Minister for Finance to-day whether the new bank rates had been agreed to, whether the Government had an opportunity of considering the matter, what the Government knew about it and whether the Government had concurred in the decision taken. The Minister explained that the bank rate had been increased and that the reason for the change was the banks' fear of large-scale losses of deposits which would lead to a very severe restriction of credit. That was the reason given— that fear of large-scale losses of deposits from the banks here would operate so as to result in a severe restriction of credit. The Minister said that after discussion with representatives of the banks the Government felt that, in view of the need for precautionary measures against serious loss of deposits and of the curtailment of credit that might follow, they could not press further for a modification of the banks' decision, and that the new rates came into operation on the 20th March.
The British problem to which an increased bank rate has been applied is a situation in which the British want to reduce commercial activity in the normal sphere. They want to reduce employment in the normal employing agencies; they want to curtail the purchasing power of their people and they want to cut down prices and profits in the more normal activities of the country's life in order that they may have capital, that they may have labour and they may have capital equipment for an economy devoted to a large rearmament problem. Therefore, as I say, over the normal range of a very considerable amount of the country's necessary life they want to reduce employment, to reduce activity and to reduce profits. We here, on the other hand, are concerned with the delayed operation of building up the resources of our country and utilising our capital and credit for that purpose, but through the action of the banks in changing their bank rates we get applied to us, a country where a normal commercial, industrial and agricultural economy remains to be carried on, the particular type of policy that Britain has applied to stop development, to stop employment and to stop providing immediately for a large part of their economy there.
I say the Government here are acquiescing in the application in a most emphatic way of a policy which can have no effect here except to stop development, to reduce activity in commercial life, to reduce employment and to reduce the profits that should naturally arise in industry. That is the situation that is being covered up here to-day by all the window-dressing of gibe, sneer and criticism and lack of explanation we have had from the Government Benches. I listened to the Minister for Industry and Commerce on Friday last, hoping that he might bring, with the responsibility that attaches to his Department, some light into this situation, but I never heard the Minister for Industry and Commerce so effectively obscure in his remarks than he was on Friday.
The bank rate has been increased from the 20th March. So far as I can understand, the application of that policy here is being pursued with a raw roughness by the banks that is not being applied even in Great Britain itself. We are asked to acquiesce, without any further information from the Minister or the Government, in the application of these new rates, without any explanation as to the effect in detail that they are likely to have on the various types of loan takers or borrowers, or any review of what the likely effect is going to be on our commercial life or on employment here generally.
The Government must take it that that is not going to be tolerated and will not be tolerated. We have sitting here, in every Party in this House, men who have had not only many years of experience of life and work in the Dáil but who have sat as leaders of their various Parties in an Irish Government. Every Party, therefore, in this Assembly has men sitting here as leaders who have had the responsibility of looking at the facts of Government machinery, of details of administration and the life of the country. They have had the responsibility of sitting in a Cabinet as Ministers.
It is inconceivable that we are going to be asked by the members of the Government to sit quiet while we see a policy pursued of the kind that I have referred to, a policy that, in Great Britain, is intended to choke the normal activities of industry for a large section of the people there in order to force them to provide capital for their rearmament policy and the full operation of such industries as can contribute to their export trade—to see that policy applied to this country which wants its developments. If that development is choked here through the bank rate, by a policy which is being pursued in Great Britain, then there will happen to this country what will happen to the choked side of the economy of Great Britain; our workers here will be forced from an economic area here over to Great Britain to take whatever part they can find in the rearmament employment that is there.
That position cannot be left in the way it is. All of us, as I say, have a fairly responsible approach to things. We understand what it means to have our currency linked up in the way it is with Great Britain. When the Central Bank Bill of 1945 was going through the Dáil, Deputy McGilligan, myself and others attempted to see that some kind of machinery would be introduced in it that would enable the Irish £ to be slipped from the British £ if it were necessary. I do not see, in view of our close connection in trade as well as the volume of trade between the two countries, that it would be any advantage to slip the Irish £ from the British £, but if, under some of the emergencies which Fianna Fáil are capable of seeing in the world, it were advisable and necessary to do so, then there ought to be machinery there so that it could be done without having a wrangle about it at public meetings or at street corners or the crossroads. We know that there are difficulties there. I am not pressing for anything but the clearest and simplest realisation of what is happening.
I want to know whether, under the arrangements which have been made by the banks with personal borrowers, their rates on overdrafts or loans have been increased since the 20th March. If they have, then the change in the bank rate policy is being applied here with a rigidity and a brutality that it has not been applied in Great Britain. I want to know whether the new rates are being applied in relation to those people who borrowed for house building and house purchase, and whose borrowing transactions were completed before the 20th March? Are they being asked to pay the new rates, because, as far as we can understand, the tendency in Great Britain is that they will not be asked to do so. The Association of Building Societies in Great Britain discussed the matter, and while they agreed, I think, that the new borrowings and the new advances on mortgages would be raised by ½ per cent., they decided it was undesirable that the rates should be increased in respect of mortgages that had already been entered into. It was left to individual societies to decide whether, in respect of loans already given, the rates would be raised.
I want to know why, because the British Government wants to choke up or choke down certain of their commercial activities and transfer employment from one economic activity to another, our local authorities are going to be asked to pay in respect of their overdrafts increased charges. We had the spectacle during the last war of our banks, and the Central Bank, lending hundreds of thousands, if not millions, to Great Britain to finance the war activity which Great Britain was carrying on at that time. They were lending the money at less than 1 per cent. Our Central Bank was lending money at 1.1 per cent. to Great Britain.
During the war, while these banks were lending money at less than 1 per cent. to Great Britain, our local authorities were being charged 4 per cent. for moneys which were being utilised to cut emergency turf supplies for our people. That is symptomatic of what was happening here. What is there, in the world situation which Britain is faced with, which makes our local authorities have to pay more for their overdrafts?
I want to know from the Minister, in respect of this Bill, if he has any idea of how he is going to fulfil what he is empowered to do under it. Section 3 of the Bill provides:
"The Minister for Finance may borrow from any person and the Bank of Ireland may advance to the Minister for Finance any sum or sums not exceeding in the whole £44,490,530 and for the purpose of such borrowing the Minister for Finance may create and issue any securities bearing such rate of interest and subject to such conditions as to repayment, redemption or otherwise as he thinks fit."
I want to get from the Minister some idea, and I think the Dáil is entitled to have from him some idea, of what "he thinks fit" at the present moment. When the Central Bank Bill of 1945 was before the Dáil, I had occasion to call attention to a fact which had been disclosed a short time before in the report of the inquiry into the housing of the working classes in the City of Dublin. That was in 1939, when the Dublin Corporation were negotiating with the Banks' Standing Committee for the purpose of raising £2,000,000 for housing, and when the banks declined to underwrite a public issue on the grounds as set forth in that report. The reasons given by the Banks' Standing Committee for refusing to underwrite the loan for the Dublin Corporation for the purposes of housing, are set out as follows at page 168 of that report: "(1) The uneconomic character of the housing programme, aggravated by the high level of building costs." That was in 1939; and "(2) the magnitude of the sums required by the corporation for a five-year programme of public works." The Banks' Standing Committee—they were all in it—was holding up its hands in horror at the time at the idea of the Dublin Corporation proposing to spend a certain amount of capital on housing and other important public works. Three months passed up to April of that year, and then the banks agreed to underwrite an issue of £1,500,000 on terms. Negotiations still continued, and in April, 1951, an issue of £1,500,000 of 4 per cent. stock at 96 was put on the market, of which approximately £850,000, including Government investment, was taken up, and the underwriters had to take up the remaining £600,000. That is at paragraph 495 of the report.
Now, they did that at a very substantial profit having first injured the credit of the Dublin Corporation in the public mind. In 1949 we found ourselves in somewhat the same position. The Dublin Corporation was then looking for £5,000,000. Again the Banks' Standing Committee was refusing to facilitate the corporation, in such circumstances that the Government at the time was compelled to take the matter up with the Banks' Standing Committee and ensure that a certain arrangement was made.
Actually the Banks' Standing Committee agreed that the Dublin Corporation would be accommodated to the extent of £5,000,000 at 3½ per cent. I do not want to tie up Deputies in any kind of technical detail but I think it is worth recording here a small sum that can be easily understood for subsequent reference. When banks give a loan for Government or other work certain things happen both as regards our balance of payments on the one hand and the banks' profit on the other. When £5,000,000 is advanced for housing by the banks, the housing scheme is put into operation. Certain materials for housing are imported and it can be taken that one-third of the total amount of money invested in the housing programme is spent on imports. As a result of that when the imports are brought in one-third of £5,000,000 leaves the machinery of the banks and they have to sell some of their investments abroad in order that this country may pay through the proper channels for the materials that are brought in.
Therefore, in respect of £165,000 the banks have to disinvest themselves of investments to that amount. Taking it that they have an income of 3 per cent. on that amount, they would lose on that transaction £50,000. The remaining two-thirds of the loan finds itself current here in money under various guises. One-seventh of the amount, or approximately £480,000, is available in half-crowns, florins, ten shilling notes and pound notes. In respect of that money the banks have to pay at the rate of 3 per cent. because they have to lodge securities at the back of that money to the extent of 3 per cent. They lose, therefore, on an investment of that kind something in the region of approximately £15,000. The rest of the money is purely bank money held in the banks; four-fifths is held on deposit, upon which in the past interest to the extent of 1 per cent. had to be paid. The other one-fifth is kept in current account in respect of which the banks have to pay no interest of any kind.
When the £5,000,000 was issued by the Banks' Standing Committee to the Dublin Corporation for the purpose of enabling them to carry out their housing programme and when that transaction was in full swing £1,600,000 had been taken from the banks to pay for imports. There was new money— pounds, shillings and pence—to the extent of £480,000 in circulation. There was new bank money held in the banks on deposit to the extent of £2,296,000 and there was on current account in the banks £574,000. That gives a total of £5,000,000.
On the moneys that were spent abroad the banks suffered a loss of income of £50,000. On the cash in circulation here the banks had approximately a loss of £15,000, and in respect of the £2,296,000 on deposit in the banks they had to pay 1 per cent. That cost them about £23,000. In respect of these losses, therefore, the effect of giving a £5,000,000 loan for housing meant that the banks suffered a loss of £88,000, but in loaning the £5,000,000 at 3½ per cent. they had an income of £175,000. They had a difference, then, of profit, if they had no other expenses in connection with it, of £87,000. But the banks claim that they have administrative costs in respect of money that is both current and on deposit of about 1 per cent. That would mean that they have administrative expenses of £27,000.
I do not believe that, but I am giving them credit for it. The net result of the whole business is that on that loan of £5,000,000 to the Dublin Corporation the Irish banks generally made an annual profit of at least £60,000. Prior to that the banks had refused the Dublin Corporation terms on a loan that would have been much more advantageous to the banks and they had pressed on the Government that the terms were not good enough; generally, they wanted this loan to be given at 3¾ per cent. and issued at 99 instead of 100. That would have brought the banks something like a profit of £73,000, something in the neighbourhood of £70,000 a year, at any rate, as well as giving them a bonus at the end of the term to the extent of 1 per cent., which would amount to something like £50,000.
That was the position then and we were very anxious to face up to that position and to the use of our country's capital and our country's credit in the general pursuit of our national policy of development. We had not had an opportunity of bringing these matters around the conference table to a clear understanding. Speaking for myself, I was in the position that I could not see that the general personnel of the Banks' Standing Committee understood their responsibilities as the creators of credit here or that they even understood their own particular interests. It seems to me, from my former contact with the problem of the refusal of money for housing here, that if the public subscribed for housing without the banks having to give any contribution, the banking system loses money. There is the development in the country that, associated with the development of our housing and the building up by our people of the roof over the nation's head, increases the country's prosperity, increases its income and brings the raw material, whatever the raw material of the banks is, to the banking mill to keep the bank mill going.
It seemed to me that they were entirely blind to that. This is a problem which we have to face here in a constructive way. It is not a problem which can be discussed and argued out on the side of the road. It is a problem which it is very necessary to look at properly and to envisage in this Assembly.
I, therefore, ask the Minister for Finance to tell us what is going to happen in regard to personal loans, what effect the recent increase in the bank rate will have on those people who, through their savings and their capacity to work and to earn and to develop this country by their efforts, are pledging their credit so that they can put a roof over their heads, form a home and be an integral part of the country's wealth and the security for the country's hope of happy, comfortably placed families. For the moment I take the Minister for Industry and Commerce at his word when he asked, in a not very helpful speech, that Party bantering might at least stop while we discussed, either in arithmetic or in theory, where this country stands with regard to the use of its capital, the use of its credit, and the purposes to which these are to be applied.
I know that there are many people who would like to haul the Minister for Finance over the coals when talking about the Marshall Aid moneys, where they came from, why they came, and what was done with them. For the purpose of our discussion to-night and next week, when we face the Budget, I give him a present of all he may say with regard to the squandering of that money. But I would ask everybody here this question: whatever was done with the money, if it was squandered, has it made this country poorer from the point of view of the condition in which it finds itself to-day? It did not make the country any poorer for the purpose of working, on the one hand, and making use of the resources it has, on the other hand.
What we are facing in this discussion and in the discussion of the Budget next week is what from the 31st March, 1952, with the resources and opportunities we have, we are going to do with these resources, whether of money, of credit, of land or of our industrial capacity. Do not tell me that the moneys that were spent, however they were spent, and that came to us by reason of the fact that America gave us loans in order to enable us to continue to trade with them, will make the fabric of this country poorer on the 31st March, 1952. I suggest to the Minister that these are fundamental matters that require to be isolated from any kind of backwash of the bickering that the Minister seems to invite in this House, and that if these problems are not faced up to now, then another opportunity will be bedevilled and destroyed by the antics and the approach of the Government to these problems.
