Dáil Éireann debate -
Thursday, 19 Feb 1953

Vol. 136 No. 9

Committee on Finance. - State Guarantees Bill, 1952—Second Stage.

Minister for Finance (Mr. MacEntee)

I move that the Bill be now read a Second Time. The purpose of this Bill arises from the fact that it is Government policy not to continue to rely on emergency statutes where it is appropriate to have permanent legislation. The present Bill implements that policyin connection with State guarantees. The Emergency Powers (No. 157) Order, which was made in 1942, and subsequent amending Orders, authorised the guarantee of repayment with interest of borrowings by certain State-sponsored bodies, mainly those which were set up during the emergency to provide for and assist in the maintenance of essential supplies.

The bodies whose borrowings are so guaranteed at present are set out in the Schedule to the Bill. A limit to the amount which may be guaranteed in each case has been specified by the relevant Orders, which require also that a statement be submitted to the Dáil every year containing particulars of the amount which may be guaranteed in each case, of the guarantees actually given and showing the State's contingent liability for principal as at the 1st April and the amount of any payment by the State in fulfilment of the guarantee.

It is desirable to retain permanently the power to give guarantees of this kind so that central importing and distributing agencies and other concerns functioning under State auspices may be facilitated in obtaining the financial accommodation necessary for their activities. As I have stated, the bodies listed in the schedule to the Bill are those whose borrowings are at present guaranteed under the Emergency Powers (No. 157) Order, as amended, and the maxima specified in the schedule are those provided for by the Orders with one exception, that is Fuel Importers (Éire) Ltd., where the maximum is being reduced from £6,000,000 to £4,000,000, which is considered to be sufficient in present circumstances.

The Bill will continue in force existing guarantees, but provision is being made in Section 9 for amending the Schedule by deleting a body, adding a new one or altering the maximum amount of the guarantee which may be given in any case. The amendment of the Schedule will be by Government Order. A significant change is being made in so far as before any Order is made adding a new body to the Schedule or increasing the maximum amount of the guarantee, such an Order must havebeen approved in draft by resolution of each House of the Oireachtas.

It will, therefore, be seen that the provisions of the Bill differ in three important respects from those of the basic Emergency Powers Order. Under the 1942 Order any State payment under a guarantee would be from voted moneys. As this Bill, when enacted, will become permanent legislation, it is considered preferable to provide for the fulfilment of a guarantee by an advance from the Central Fund, subject, however, to the recoupment to the Central Fund from voted moneys of any amount not repaid within 12 months.

Secondly, under Section 9, as I have already mentioned, an Order adding a new body to the Schedule or increasing the maximum amount that may be guaranteed in the case of a scheduled body cannot be made until a draft of the Order has been approved by resolution of each House of the Oireachtas. As I have already indicated, the position under the existing law is that a guarantee Order can be made without reference to the Dáil or Seanad and becomes effective forthwith, but like all Orders made under the Supplies and Services (Temporary Provisions) Act of 1946, it has to be presented to each House, either of which may by resolution annul it.

Section 8 of the Bill for the first time requires bodies availing of State guarantees to furnish an abstract of their accounts, together with the auditor's report thereon, to the Minister for Finance, who will present them in due course to each House of the Oireachtas. This provision will ensure that the full information will be available about the financial operations of the bodies whose borrowings are guaranteed by the State. The relevant Emergency Powers Orders will be revoked from the date on which the Bill comes into operation.

Mr. Dillon

In general principle, it is the proper course to take to dispose of Emergency Powers Orders and substitute for them regular legislation of the Oireachtas. As I understand the Minister's statement, that is the primary purpose of this Bill. I agreewith the procedure envisaged in Section 9, which stipulates for the prior consent of both Houses of the Oireachtas before any amendment is made in the Schedule. I do not understand, and I do not think the Minister has explained, why he has decided that it is desirable to adopt this Central Fund procedure rather than the Supply Services Estimate procedure, where it is necessary to pay money out of the Exchequer on foot of such a guarantee, even where he anticipates that his payment would be subsequently recouped. I think the Minister would do well to tell us shortly what are the Exchequer reasons why this new procedure is preferred to the procedure which heretofore has been followed.

In regard to this Bill, I think a matter of interest appears even in more strikingly arresting form than it arose in connection with the Bill which we have just disposed of at the instance of the Minister for Industry and Commerce. This Bill is designed to. legalise the Government guarantees of certain semi-State organisations whose primary purpose was to maintain, and indeed is to maintain, supplies essential to the community as a whole. The procedure under the Emergency Powers Order Regulations has been that these firms dealt with their bankers and that their bankers were sustained in the overdrafts which they authorised to these firms by the guarantee of the State, that if these firms failed to liquidate their overdrafts in due course then the Exchequer, the Treasury, would liquidate them in the last analysis and in the meantime the bank would enjoy a continuing guarantee for an agreed rate of interest on the overdraft accommodation provided.

Perhaps the Minister will correct me here if I am wrong. I think that under existing bank rates the interest rate chargeable on overdrafts guaranteed under this procedure, where there is a State guarantee, is 3½ per cent. Perhaps the Minister has not that figure to hand?

Mr. MacEntee

I think it is.

Mr. Dillon

Is that the correct figure —3½?

Mr. MacEntee

No, no. The present rate is 4½ per cent.

Mr. Dillon

I am much obliged. I ask the House to look at this calmly and dispassionately, as it is a matter which deserves conservative consideration. Let us lean to the Right in examining this matter. I take the case of Grain Importers.

Mr. Hickey

You are taking a good one, too.

Mr. Dillon

They are bringing in merely the raw material of the bread we all eat. To bring that grain in to make bread for our people, it is necessary to discharge obligations on shipping documents and meet payments for cargoes arriving, in the ordinary course of commercial practice. In respect of every cargo landed, there is a planned schedule of disposal which demonstrably will prove that there must come to hand the full amount paid out for the grain, plus whatever charges have come in course of payment, and that there is no other place for that money when it comes to hand except the coffers of the bank which made the advance in the first place. Over and above that assurance, there is the guarantee from the Government that, if any fortuitous event should intervene which would leave any balance outstanding when Grain Importers cease to function, the State charges itself with the responsibility of liquidating forthwith any such balance, whether it consists of principal or interest, and it also undertakes that, if the bankers wish it, it will meet the interest charges at every rest period, if called upon to do so.

The Minister for Finance tells us that, in those circumstances, the commercial banks, acting through the Standing Committee of the joint stock banks, charge Grain Importers 4½ per cent. interest on this money. I think it is common case everywhere that the actual administrative charges requisite for the proper keeping of accounts in a transaction of this kind are liberally estimated if we provide 1¼ per cent on the sum borrowed. I want to ask the Minister—and I beg of him to believe that the question is addressed to him in no provocative sense—can he tellthis House what service is rendered by the joint stock banking system to the borrower, to the community or to anybody for the 3¼ per cent., which represents the difference between the 1¼ per cent. book-keeping charge and the 4¼ per cent. actually levied?

Is it or is it not true, that elsewhere, when national emergency confronted the Government of the State, the joint stock banks were mobilised and told that there could be no longer any question of the payment of interest charges by the community for credits required for the maintenance of the State's very existence and that they, therefore, must henceforward constitute themselves the machine whereby credit was mobilised for the common good, and that the charge levied for that credit must correspond to the actual out-of-pocket expenses for the administration of the accounting necessary properly to provide the credits; and that that forthwith was done, to the full extent of the credit required for the maintenance of the State?

If that be true, how can he justify a system whereunder the credit of the State is placed behind the borrowings here envisaged and at the same time the commodities, which our people subsequently must pay for in order that they may consume them, have to bear a charge of approximately 3¼ per cent., for a service the nature of which I am wholly unable to discern.

Now, this matter is so serious a matter that I feel entitled to relate facts as I know them. If I am wrong, I think it is requisite I should be corrected; if I am suffering under some illusion, it should be dissipated, because I think there are a great many people who share this difficulty. It may be that we are all mistaken and that there is a simple cogent explanation of it, but if there is, it should be put on record because I do not believe that you can go on asking of a large section of the community an act of faith in something in which they themselves cannot bring their reasons to believe. I cannot see that there is anything divine about the doctrine of interest and it is therefore right and apposite that the House should know the following facts, and that theyshould be recited in the presence of the Minister for Finance.

An Leas-Cheann Comhairle

The Deputy is going into the whole question of interest as if it is a subject which can be discussed on this State Guarantees Bill. The Chair is of the opinion that it cannot.

Mr. Dillon

I want to submit to you that we are enacting legislation to authorise the Minister to guarantee bank overdrafts and I think we are entitled to ask why if there is that guarantee by the State the State should become liable for the payment of interest at 4½ per cent.?

Mr. MacBride

The total is over £18,500,000.

Mr. Dillon

Let me recite this story, to give an instance of what actually happened. In 1950, the Government of which I was a member asked the joint stock banks to advance the sum of £5,000,000 to the Dublin Corporation and they demurred.

Mr. MacEntee

The Dublin Corporation has nothing to do with this.

Mr. Dillon

It is strictly relevant to the matter in hand. After protracted discussion, when evening came—I wish Deputy McGrath and Deputy Cowan, if they want to hold a chat, would hold it somewhere else, because it is not easy to maintain the thread of my discourse when they are chatting so euphoniously.

Captain Cowan

We would not wish for a moment to interfere with the Deputy——

Mr. Dillon

I am much obliged.

Captain Cowan

——but somehow Deputy Dillon is not interesting to-night.

Mr. Hickey

I am anxious to hear the Deputy and I find it difficult to do so while Deputies opposite are chatting.

Mr. McGrath

You are a good hand at interrupting yourself.

Captain Cowan

Sometimes DeputyDillon holds the attention of the House, but he is failing to-night.

Mr. Dillon

Let the Deputy not test me. This is Lenten time and I do not want to make rough remarks, but if the Deputy makes them to me, I will make them awfully rough to him. We have engendered an atmosphere of a peace and calm for the discussion of a matter of the first importance. At the end of protracted discussion between the Minister for Finance and the standing committee of the joint stock banks, both parties held to their respective views—the joint stock banks that they should not be asked to lend the money and the Minister for Finance that they should. I think the Minister for Finance informed them—there was no acrimony or heat engendered— that it was his duty to tell them that if they could not meet the Government's point of view, the Government would have to consider taking steps to, require them to make available the accommodation to the corporation which the Government considered it was their duty to make available. The standing committee of the banks, being a very public-spirited body of citizens, said at once: "If that is the decision of the Government, we will comply with this quasi-direction," and the matter was suitably resolved. The Minister for Finance, then, not wishing to be ungracious or unco-operative in any way, said: "Let me say, gentlemen, that if this advance to the Dublin Corporation——

Mr. MacEntee

I wish to call your attention to the fact, Sir, that there is nothing in the Bill relating to the Dublin Corporation, and I suggest that the Deputy is not entitled to transverse a transaction which took place some years ago in relation to the Dublin Corporation.

Mr. Dillon

If you will hear me, Sir, I guarantee to show that this matter is relevant.

An Leas-Cheann Comhairle

Is the Deputy relating his remarks to the Bill?

Mr. Dillon

You may dismiss the word "corporation" from your mind.If I said A, B or X, Y it would be just as relevant.

Mr. MacEntee

Or irrelevant.

An Leas-Cheann Comhairle

There is nothing in the Bill about the Dublin Corporation.

Mr. Dillon

Forget the words, "Dublin Corporation". Say I was referring to Grain Importers or anything you like. At the end of that discussion, the Minister for Finance said: "If you want the help of the Treasury in liquidating assets domiciled in London, you have only to call upon us," whereupon the joint stocks banks replied: "That is quite unnecessary. All that is here involved is an entry on two pages of the book— the debit and credit side." My case is this, that, when Grain Importers go in——

Mr. MacEntee

May I again draw your attention, Sir, to the fact that the Deputy is purporting to give an account of a transaction of which the House has no knowledge, that his account is entirely ex parte,and that the Deputy's past utterances have shown that he is not very reliable.

Mr. Dillon

He is trying to start a row and we must prevent him. He is a vain and silly man, and I am merely repeating what his predecessor, as Minister for Finance, recited in this House. I am making the case to the House that, when Grain Importers, acting under the guarantee given to them under the Schedule of this Bill, present their cheque to their bankers in Dublin in payment for a cargo, all that happens is that there is an appropriate entry made on two sides of the book and that the request of the borrower, plus the assent of the banker, bring into existence the required volume of bank money.

An Leas-Cheann Comhairle

Surely the Deputy cannot discuss the whole question of banking policy in this country on a State Guarantees Bill?

Mr. Dillon

All I am asking is this: If, behind that credit and debit entry in the bank, there stands the Treasuryas the guarantor of the redemption of the debt, what service does the joint stock banking system do for the community in respect of this transaction, the ultimate end of which is the purchase of wheat wherewith to make bread, which justifies them in levying the difference between their book-keeping cost which is 1¼ per cent. and the 4½ per cent which they recover and which must be charged on the bread of the people?

An Leas-Cheann Comhairle

The Deputy is travelling very wide.

Mr. Dillon

I want to ask why, if this charge is not levied and credit is created and spent on the purchase of armaments, the instruments of war, is it appropriate to charge it on food?

Captain Cowan

Would the Deputy speak a shade louder? I have great difficulty in hearing him.

Mr. Dillon

I am not very much concerned whether Deputy Cowan hears or not.

Captain Cowan

I am. I would not waste my time if I could not hear what he is saying.

Mr. Dillon

I suggest that the Deputy and Deputy McGrath should go out and read the Official Report when I am finished.

Mr. Cogan

The Deputy should read the Standing Orders.

Mr. Dillon

If this trinity would adjourn out to the Lobby, we would all be much happier.

I want to ask the Minister if transactions of this kind, designed for the purchase of armaments of war, are by universal agreement amongst the civilised communities of the world over, free from the impost of the 3¼ per cent. to which I have referred, why is it appropriate that that levy should be made when the goods to be purchased are fuel, grain or tea?

Mr. Hickey

Or the Butter Marketing Committee.

Mr. Dillon

I am looking at the firms in the Schedule. If the purpose is not in fact to purchase any commodityfrom abroad but simply to assemble an agricultural product like potatoes preparatory to its being shipped abroad in the ordinary course of trade, the same holds good. It is a source of regret to me that the Minister for Finance should reveal symptoms of indignant impatience because if he believes honestly in the rectitude and justification of this charge, this is the time when justification should be made. If he does not know that a great many people who have given a good deal of thought to this question are troubled by this matter, he is living in blinkers.

I want to sound this note of warning which I have sounded once before. Interest is the vade mecumof that school of thought which attaches to itself the description of orthodox. I think there is a great deal of enduring value to any community in the orthodox approach to finance and economics but I warn the orthodox of this danger, that if under the shelter of that umbrella they seek, by the creation of mystery, of obscurity, to maintain practices which right reason can no longer defend, they put in very real jeopardy valuable and even indispensable parts of orthodox economic doctrine which may very well be rejected by the people if they become indissolubly associated with certain archaic beliefs which the ultra orthodox seek to preserve beyond any conceivable time of true utility.

Unless I can be controverted—and I admit that possibility—I can see no justification for the requisition by the banking system of any country of a pure interest charge, as distinct from a book-keeping charge, on advances made to the community for the maintenance of essential services without which the community could not carry on. If there is some mistake in that thesis, I think I have a right to ask the Minister responsible for the Department of Finance to expose the error now. If it is not possible for him to do so, I think I have a right to ask him, in the name of our Government, to give a lead in segregating those elements of that orthodox doctrine which may be of enduring value and which must be defended at all costs,from those elements which are archaic and have no enduring value. Unless we take courage to reject now the archaic and the invalid we put the whole in peril. I say that it is the clear and certain duty of the Minister for Finance, on the Second Stage of such a Bill as this, to do that public service. If he has a sense of the responsibility of the very important office which he occupies, he will not turn away from that duty. He will do it now.

Mr. MacBride

I am very glad that Deputy Dillon raised the issues he has just raised in regard to the practice of extracting usurious rates of interest on loans of this nature. Deputy Dillon's queries and comments are particularly relevant on this Bill, in that the purpose of the Bill is to give a State guarantee in respect to essential commodities such as fuel, grain, tea, etc. The total capital which the Bill permits the Minister for Finance to guarantee is over £18,000,000— £18,650,000. We have had no indication from the Minister as to the actual amount which is at present outstanding in respect of the different State-sponsored bodies enumerated in the Schedule. I take it that the sum of £18,650,000 is probably somewhat in excess of the amount in actual use but on a sum of this nature, if the rate of interest is 4½ per cent.—I have no means of knowing that it may not be a higher rate of interest—the total amount involved would be close on £1,000,000—between £750,000 and £1,000,000.

The people of this country will have to pay that, if not to the Exchequer, certainly by way of subsidies on the purchase of the goods which this Bill covers. We are, therefore, entitled to know whether it is really essential to have to pay an annual sum probably in the neighbourhood of £750,000 to the banks for the privilege of enjoying credit which they can create merely by a stroke of the pen and the permission of this Parliament.

It also occurs to me that the Minister might consider explaining to the House why it would not be possible to make the necessary short-term creditsthat are required available from the moneys which the Central Bank holds. As far as I can appreciate it most of the moneys required by the State corporations or State sponsored bodies set out in the Schedule were required for a short period of time, short-term or seasonal loans. I take it that the amount of £8,000,000 for Grain Importers Limited is purely a short-term borrowing to cover seasonal changes.

Our Central Bank has somewhere in the neighbourhood of £60,000,000 invested in British Government securities at 1? per cent. or thereabouts. It does seem ridiculous that these bodies which deal in essential commodities required by the people here should be placed in the position of having to pay 4½ per cent. or 5 per cent. to commercial banks for short-term borrowings when these vast sums are being lent by our Central Bank at nominal rates of interest to the British Government. I imagine that it is not at all unlikely that the British Treasury uses that money which it borrows from our Central Bank just for these very purposes in order to permit them to pay on short-term basis for imports of various essential commodities under their own pooling systems.

It may be that the Minister contemplates availing of this Bill to do something of this nature in which case I am sure he can rest assured he will have the support of all sections of the House. But this Bill does seem to provide an opportunity for a statement by the Minister on this question.

I notice that the provisions of Section 6 of the Bill provide that the repayment of moneys paid by the Minister on foot of a guarantee to a scheduled body has to be made within 12 months from the date of the advance. Therefore, I take it that the borrowings contemplated are probably short-term borrowings. Possibly the Minister will be in a position to enlighten the House on this when replying. Probably, generally speaking, it is better to have these provisions embodied in a statute than left to implementation by means of Emergency Powers Orders and, therefore, the Bill is necessary. I think theMinister might well consider the possibility of financing the borrowings of State sponsored bodies who require money for short-term purposes by means of the Central Bank. The Central Bank might well use some of the funds which they so readily seem to lend to the British Government at cheap rates of interest for financing such short-term borrowings here.

I hope the Minister will not say that he is not in a position to influence the Central Bank in this direction. He has certain powers to direct the Central Bank and to put forward suggestions of this nature to the Central Bank.

Mr. Hickey

I am very interested in this Bill especially having gone into the matter of the amount of interest we have been paying in overdrafts in respect of some of the bodies in the Schedule. For the information of the House the people of this country had to pay in respect of Grain Importers Limited last year £87,000 in interest alone on their overdraft for doing their own work of importing wheat to be manufactured into flour. I see that Fuel Importers Limited are also included in the Schedule, and last year we paid £128,000 odd on interest alone on the overdraft in respect of Fuel Importers Limited. I also see that Tea Importers are included in the list. Last year we had to pay £3,931 in interest on money for the overdraft in respect of Tea Importers. Irish Steel Holdings is also included in the Schedule, and last year we paid £7,286 in interest alone on the overdraft of that body.

Is it not time that we should seriously think about asking ourselves on behalf of the people of this country what service we got from the people to whom we paid £87,000 interest on such an overdraft? We used the State's credit to guarantee the payment of that sum of money to enable them to import the wheat.

During the year I asked what amount of money was advanced and by whom for the coal we imported from America. The reply I got was that £2,500,000 worth of American coal was in stock, on which we paid 4½ per cent., which amounted to £112,500 last year. Of course, the percentage is still 4½ per cent., if not more. We are payingthe same this year, because the stocks are there. I would like to know how the Minister or the Government can justify the payment of this amount of interest on credit which belonged, not to the bankers, but to the country and the people.

I think it is futile to argue a matter of this kind, because the Minister for Industry and Commerce, a few minutes ago, had a similar Bill before the House guaranteeing £1,500,000 for anybody who wanted money to develop industries in this country. Thirty-seven million pounds of our people's savings in the Post Office Savings Bank are invested in England at 2½ per cent. Some of it is invested at 3 per cent. The strange thing about it is that some of that money at 2½ per cent. is invested in war bonds. Is it not time for us to think seriously over the matter? Why should we pay 4½ per cent. interest on an overdraft to these semi-State organisations? We have not got any explanation of what services we are getting. I suggest that 1¼ per cent. should roughly be the cost of administration and that would be sufficient to pay on these overdrafts. Before I could give my consent to the passing of this Bill I would require an explanation from the Minister as to what he will pay in interest on these overdrafts in the present year.

Mr. Rooney

We should get some indication from the Minister regarding previous experience in relation to this Bill. This method of financing for these necessaries did not arise just with the presentation of this Bill. We had previous experience to go on. We see in this Bill that there is provision for 4½ per cent. interest. I think that some years ago it was 3½ per cent.; now it is 4½ per cent. If we are satisfied that, in fact, this involves only a matter of book-keeping, and if we take it that 1¼ per cent. ought to cover that, there is soft money to the extent of 3 per cent. The general taxpayers, for whom this Bill is supposed to be implemented, are in fact, on their bread, fuel, tea and the other services for which this Bill provides, paying for it to the extent of 3 per cent. over and above the ordinary book-keeping charge. I want to put it to theMinister that he should be able to know from previous years and from previous experience what, in fact, would be a fair margin of interest for the money to be made available. If we could arrange that the Central Bank would provide this money, then the interest which would be imposed upon the taxpayers ought to be the same as the interest on money which is being made available in Great Britain by the Irish Central Bank. We might be able to hear from the Minister, too, some of the figures for the past couple of years in relation to this matter. The money is being made available from—if you like to put it that way—a private source in the interest of the State and the taxpayers are being made the guarantors in the matter of interest payment. In the list of items in the Schedule we see the maximum amounts that may be guaranteed. We have fuel, £4,000,000; bread, £8,000,000; tea, £6,000,000. Where these very large items are concerned I feel that the Minister should tell the House the reason why it is considered expedient to guarantee 4½ per cent. to the joint stock banks or other interests who are making this finance available for the ordinary process of importing and helping, I presume, in the distribution of these three commodities in particular.

Mr. Cogan

I cannot say that I am very deeply impressed by the anxieties which Deputy MacBride and Deputy Dillon have expressed in regard to the matter of bank interest and bank operations generally.

I have always felt doubts as to whether the financial system under which we operate in this country is in the best interests of the nation. I expressed these doubts very freely while Deputy Dillon and Deputy MacBride were Ministers of State. from them I received nothing but a cold rejection of my proposals and my suggestions. I was told officially by the Government of which they were members that we had no need to worry about the question of finance because all the money that that Government required for development work or for what is implied in this Bill, was being provided by the United States Governmentunder what was then known as Marshall Aid, that any question of financial reform was a mere waste of time and that that Government had no time to think of such matters. Now, when they are in opposition, they show a great zeal for financial reform. They have become social reformers, apostles of the Douglas system and of other reforms which have been mooted from time to time. I distrust their zeal. During the three and a half years they were in office they gave no indication of any belief in these principles. They were prepared, while in office, to follow too readily the lines of orthodox finance, to accept the dictates of the banks and to balance the accounts with the assistance of Marshall Aid.

Mr. Palmer

Why did you support them then, for three and a half years?

Mr. Cogan

It was for that reason that I could not continue to have confidence in them and that I found it necessary to withdraw my support from them.

Mr. Palmer

Thanks be to God:

Mr. Cogan

I think this matter requires investigation. The Minister may not agree with me, and many members of this House may not agree with me, but I feel that the whole financial system requires thorough investigation. For that reason, I have tabled a motion demanding such investigation to find out if it is possible to finance urgent works of development at a cheaper rate than orthodox finance demands.

Other issues are also involved here. In this Bill we are seeking to give guarantees in respect of Fuel Importers and Grain Importers. I often wonder why it should be necessary to give such extensive and far-reaching guarantees in respect of these two firms. In the main, this is an agricultural country. I do not think we should be dependent, to the extent we are dependent, on external sources for imports of grain. This is a country with vast undeveloped peat resources, and I do not think we should be so dependent on outside sources for our fuel supplies. I remember that, overthe past 20 years, there was a campaign against wheat, beet and peat. I remember hearing somebody say that "wheat and beet and peat had gone up the spout, thanks be to God." Because there was a campaign against the fundamental industries, we, as a national Parliament, have found it necessary, and are still finding it necessary in this Bill, to guarantee certain State firms which seek to bring into this country commodities which we could produce here if it were not for the arrogant and malicious opposition of certain individuals to the development of our own native resources. I trust that the time will come when we can scrap Fuel Importers, Limited, and Grain Importers, Limited, or reduce their operations to a very small scale, and that we will find ourselves in a position to depend upon the ability and energy of our people to develop our land in the production of wheat, and our bogs in producing native fuel for our people.

I think that is the approach which Deputies who are nationally-minded should adopt in regard to this Bill. Wheat, beat and peat have not "gone up the spout," and there is still a future for those products within this country. It is our duty to ensure that they are developed and produced to the maximum extent.

I hope that the Government will give attention to the very complex problem of finance. I am not one of those who approach it in a light-hearted way or say that the financial system is all right while a certain Government is in power and that it is all wrong when another Government is in power. I am one of those who have a doubt in their minds at all times in regard to the whole system. I realise fully the difficulties. I realise that we are a small nation bound by trade with other nations to our present banking system. It is not easy to break loose from these ties and to establish what some Deputies would describe as financial independence. I realise that the first step towards financial independence is the development of a spirit of economic independence, and that the more we develop our own industries and resources the stronger and the more powerful we willbe to fight for control of the financial system and for the establishment of financial independence.

Captain Cowan

I am surprised at the line which this debate has taken. The matter before the House is a very simple one and it might be decided on fundamental principles whether, what the Minister is proposing here, is good or not. In other words, we have the following organisations mentioned in the Schedule: Fuel Importers, Limited; Grain Importers, Limited; Tea Importers, Limited; Irish Steel Holdings, Limited; the G.N.R. Company (I), the Irish Potato Marketing Company, Limited, and the simple question before the House is should the State guarantee the sum of approximately £19,000,000 referred to in the Bill?

That is the simple issue before the House and it might be debated, I suggest, in an atmosphere of reality. It did not seem to me real to-night when I heard Deputy Dillon talk about this whole matter of finance. He says he is the orthodox person, and that he is anxious to preserve the orthodox idea; but he believes that those people who are, in fact, the orthodox people, are acting in a foolish way. Now that may be so. I think he is right, that in regard to our general finance, some people who are, in fact, in charge of our financial machine are, for themselves, acting in a very foolish way. I do not think that Deputy Dillon is in any way a revolutionary. Far from it. I do not think that Deputy Dillon wants any change in the financial system, and I think he has only introduced this matter here as a debating point.

Now, Deputy MacBride, of course, is in a different category, because he has been speaking on financial matters for quite a number of years. The only trouble with Deputy MacBride is that, though he has discussed this whole business of finance for a period of approximately six years, to my personal knowledge he has not increased his knowledge or his understanding of the problem.

Mr. MacBride

I am always willing to learn from Deputy Cowan.

Captain Cowan

Deputy MacBride will remember very clearly that, when he and I were very closely associated in the organisation of Clann na Poblachta, and when we wanted to write into the programme of that Party a financial policy, a very serious difference of opinion occurred between Deputy MacBride and myself as to what, in half a dozen lines, should be set out as the financial policy of Clann na Poblachta.

Mr. MacBride

And that proves that Deputy MacBride was wrong?

Captain Cowan

No, but at that time we argued—

Mr. McMenamin

Are we going to have the history of the Clann na Poblachta Party discussed on this Bill?

Mr. MacEntee

We had an account given of discussions with bankers by a gentleman who was not there.

Captain Cowan

Anyway, Deputy MacBride will recollect that at that time we argued this point almost on what one might term "the Russian system" over a period of three or four weeks, and we reached deadlock. Deputy MacBride, at that time, wanted the whole fundamental national financial policy to be the nationalisation of the banks. I said, and advocated as a person who had grown up in the Labour Party——

Brendán Mac Fheórais

The Minister for Finance, at this stage, may say: "The flowers that bloom in the spring, tra-la, have nothing to do with the case."

Captain Cowan

Having been taught and instructed and having spent a good lot of time studying what I believe to be a new approach to finance, I said to Deputy MacBride, "You are entirely wrong as to how it should be done."

Mr. MacBride

This is a complete figment of Deputy Cowan's imagination.

Captain Cowan

After three or four weeks' discussion——

Mr. MacBride

I thought you said a moment ago six weeks?

Captain Cowan

No. After this period of discussion, it could not be resolved by our fellow comrades, and it was referred to the adjudication of a lady, now deceased, who was acknowledged by us to be an authority, and this lady said: "Captain Cowan is right."

Brendán Mac Fheórais

And the result?

Captain Cowan

The Deputy will please keep out of this. The result was that we had written into the Clann na Poblachta policy my ideas of our approach to monetary problems. I realised then, of course, that Deputy MacBride was a tyro in those matters and that he did not know very much about them. I am amazed at the little he has learned in the six years since then and that he has not advanced one step towards an understanding of fundamental monetary problems.

Mr. McMenamin

Deputy Cowan has?

Captain Cowan

Many people who understand the problem know that Deputy MacBride does not understand it, but he avails of any opportunity of introducing this matter into debates in the House. I am sorry that a man of Deputy MacBride's undoubted ability, because he has ability——

Mr. MacBride

Has he?

Captain Cowan

——and undoubted intelligence, because he has intelligence——

Mr. MacBride

No, no. The Deputy is making a mistake.

Captain Cowan

There is no doubt about it.

Mr. MacBride

I could not accept that.

Captain Cowan

I pay Deputy MacBride the tribute——

Mr. MacBride

It is not Deputy Cowan.

Captain Cowan

——of being intelligent, able, most industrious.

Brendán Mac Fheórais

Is the Deputy feeling well?

Captain Cowan

There is no more industrious Deputy than Deputy MacBride.

Brendán Mac Fheórais

It is the 'flu.

Mr. MacBride

Would it be in order to ask to have Deputy Cowan examined?

Captain Cowan

Deputy Corish is concerned with only one problem—how he will come back into office in this country, and I wish he would keep out of these matters because he will never come back into office if he remains in the alignment he is in at the moment.

Mr. MacBride

Has Deputy Cowan given up the idea of being Minister for Defence?

Captain Cowan

Deputy MacBride reminds me of an active wasp in an inverted tumbler. He is working, flying, walking, he is never idle but he never gets anywhere. He is still within the inverted tumbler. I would suggest to Deputy MacBride that the problem of monetary control and finance is a serious problem, that we can convert the people to the proper approach to these matters but that we will do it only if we understand the problem ourselves.

Mr. MacBride

And the only person who understands it is Deputy Cowan.

Captain Cowan

I do not say that I am the only person who understands it but at least I say that I do understand it. At least, I have spent a lot of time trying to understand it. It is a serious problem. Within the Labour Party it was believed to be the most important matter in the correct reorganisation of the country so that unemployment would be abolished. We studied what they did in New Zealand. We studied all their pamphlets. I went laboriously through everything that Dr. Alfred O'Rahilly wrote. I only wish that he could write in two words what it takes him 100 words to write. Nevertheless, I laboriously went through it. There is, undoubtedly, hope for this countryif we can understand the problem and if we can make some use of our understanding of it.

Mr. MacBride

Would the Deputy tell us what he has learned since the Fianna Fáil Party joined him?

Captain Cowan

I have not joined the Fianna Fáil Party and I am still endeavouring to improve my knowledge. I regret very much to see, after six years, that a man in whom I had a considerable amount of trust for a time, has not removed beyond what one might term the non-essentials of the problem. Deputy MacBride has a complete grasp of the non-essentials of finance, but that will not help us or the people. We want persons who have a complete grasp of the fundamentals and the essentials.

Mr. MacBride

Such as Deputy Cowan?

Captain Cowan

No; I do not hold myself up as having reached that stage.

Mr. MacBride

Such as the Minister for Finance, then?

Captain Cowan

The Minister and I disagree entirely in matters of finance.

Mr. MacBride

Oh, do you?

Captain Cowan

We do. We differ entirely on monetary matters in so far as they affect the State.

I was entirely amazed when I heard Deputy Dillon to-night talking as if he were a type of Socialist because I believe it is not genuine. I do not believe that Deputy MacBride is genuine because he did say that the Government could influence the Central Bank by putting forward suggestions to them and he suggested that we might infer from that that the Government might place on the Board of the Central Bank persons who would be influenced by the Government. Deputy MacBride had the opportunity a few years back, when vacancies occurred in the Central Bank, to ensure that the personnel of the Board of the Central Bank was a personnel that would react favourably to suggestionssuch as these, but he did nothing about it.

Mr. MacBride

That is untrue.

Captain Cowan

Deputy MacBride was a Minister of the Government that appointed the Board of the Central Bank and he cannot get away from that fact. If he had been able to get out from the inverted tumbler, even during the period when he was Minister, he might have been able to see that some of the people in the Central Bank would react favourably to suggestions for monetary improvement.

As I said, this is a very simple Bill. The Bill sets out that there are certain organisations in existence who, for the purposes of their ordinary successful working require capital—capital to the amount of almost £19,000,000—and this Bill does nothing more or less than to provide that the State will guarantee that they get this money.

Mr. Hickey

And pay the interest, of course.

Captain Cowan

This Bill guarantees that they will get this money for the purpose of carrying on. The whole issue that should be before us to-night is whether this is wise or unwise; are we in favour of this or are we against it; should these organisations be asked to carry on without this guarantee; if this guarantee does not exist will they get the money; are they to be assured of the money that will be necessary for them to carry on?

Mr. Hickey

Should not the State be in position to guarantee the money rather than ask a second body to guarantee it, such as bankers and money lenders?

Captain Cowan

This is a very simple Bill of only ten sections and each section sets out clearly what the Bill provides. I agree entirely with Deputy Hickey. We were brought up in the same stable. We studied the same theories. We advocated the same methods of improving those things. I will always say about Deputy Hickey that when he talks on monetary or financial matters he is genuine and sincere and I believe that I belong to the same school as Deputy Hickey inthat matter. We can investigate the whole monetary matter and we can certainly improve it but we should deal with a problem such as is before us here on its own merits and within its own limitations. If we want to change the monetary system, let us change the monetary system.

I read to-day or yesterday that this whole matter was considered by the Fine Gael Party at their Ard-Fheis and a speech was made by Deputy Costello who had been Taoiseach in the inter-Party Government. Deputy Costello suggested certain alterations in the financial system, but it was made as clear as could be in the papers I read that it was laid down by Fine Gael that that did not mean any break with sterling. I want to know from Deputy MacBride does he accept that?

Mr. MacBride

Tell us what you mean by a break with sterling.

Mr. MacEntee

What do you mean?

Mr. MacBride

You ask me a question and I will answer it. The link with sterling consists, in my view, of three separate links, the first being that we are in the sterling area. I do not think that that link can be touched. That is a link arising from the fact that we trade with the sterling area. All that it involves is that we accept sterling as the medium of international exchange in the same way as France accepts it and the British Commonwealth accepts it. The second link is one whereby we, conditionally, over a long period of time had exported our capital and invested it in England instead of utilising it here. To my mind, that link is the most important one and one which should be broken. The third link is the link whereby, willy-nilly, our currency is anchored to the British £ on a parity basis. Unlike any other member of the sterling area, our Government is deprived of the right of varying that link.

Mr. MacEntee

It is not.

Mr. MacBride

If the Minister examines the position, I think he will find that is so, that the currency Act has that effect. These are the three links. In my view, two of them aredamaging to the country and should be broken. The third one, whereby we are a member of the sterling area, is one which cannot be touched. It is a geographical fact and arises from the fact that most of our trade is with the sterling area.

Mr. Hickey

Do you agree that we should have a separate currency of our own?

Mr. MacBride

Certainly.

An Leas-Cheann Comhairle

In the opinion of the Chair, none of this is relevant to the Bill. Deputies must relate their remarks to what is in the Bill. We cannot have a debate on monetary policy on a State Guarantees Bill.

Captain Cowan

I am inclined to agree with you. The trouble is that we have been so long on this it is hard just to disentangle ourselves. However, I asked Deputy MacBride a question and he was kind enough to answer it. Deputy MacBride's answer is there for all the authorities on finance to read in the Official Report. It will be there to prove and to establish beyond doubt that Deputy MacBride knows nothing whatever about the serious problem of the monetary position of the country. In other words, what is known as the link with sterling——

An Leas-Cheann Comhairle

Will the Deputy say what the link with sterling has to do with the State Guarantees Bill?

Captain Cowan

That is what I am trying to do, to show that it has nothing to do with the Bill.

An Leas-Cheann Comhairle

The Deputy should relate his remarks to the Bill.

Captain Cowan

I am trying to prove how foolish and futile was the contribution we had from Deputy MacBride on this Bill and how futile and foolish was the contribution from Deputy Dillon. I want to establish that their approach to this Bill is entirely wrong and that it showed they had no conception, good, bad or indifferent,as to what was in the Bill. I admit that Deputy Hickey immediately saw the weakness in the case put up by Deputy MacBride. It does not matter whether we are in the sterling area or whether we trade with sterling. The problem I posed is, must we break the link with sterling? Fine Gael said no. Deputy MacBride now has trimmed his sails——

Mr. MacBride

I have been saying the same thing for years.

Captain Cowan

He is trying to be with the Fine Gael idea of not breaking with sterling and at the same time to keep on the best terms he can with Deputy Hickey, who realises that we must break with sterling.

Mr. MacBride

Of course that is untrue. I have written several pamphlets——

Captain Cowan

That is not a point of order.

Mr. MacBride

The Deputy is not entitled to misrepresent me.

Captain Cowan

I gave way to Deputy MacBride to answer a question; I will not give way to his disorderly interruption.

Mr. MacBride

Deputy Cowan is not entitled to misrepresent what a Deputy says.

An Leas-Cheann Comhairle

The Deputy must not make another speech. I ask Deputy Cowan to come to the Bill.

Captain Cowan

You deprive me of a tremendous lot of enjoyment because I should love to follow up my argument and to prove and establish that we have a humbug in this House posturing as a person who knows something about finance and who knows nothing about it.

Mr. MacBride

We certainly have one and he is standing up there.

Captain Cowan

The difference between Deputy MacBride and me is that I do not pretend to know anything about it. Deputy MacBride is a figure of pretence and humbug.

An Leas-Cheann Comhairle

We are not discussing Deputy MacBride. If the Deputy does not discuss the Bill, I shall have to ask him to resume his seat.

Captain Cowan

I would not like to finish on that note. Unfortunately, you, Sir, were not here when the case was opened and when the matter was put in a way that I felt it was necessary to deal with it. We are dealing with a serious problem here. If we are dealing with a serious problem, we have to know whether we understand the problem or not. That is the line I have been trying to argue upon. Unfortunately, I am driven back to the Bill.

I want to know is it desirable that we should guarantee, as provided under this Bill, the moneys that will enable these State and semi-State institutions or bodies to carry on? I think it is desirable. I think it is necessary. I think that, irrespective of whether we are within the present monetary system or outside it, we must enable them to and ensure that they carry on. I believe this is a good Bill. I believe it should have the support of the House. When we come to the other issue as to whether or not we want to break the link with sterling——

Mr. Hickey

And be masters in our own house.

Captain Cowan

And be masters in our own house, as Deputy Hickey says —I will be prepared to discuss that and to take my stand with Deputy Hickey, as I did for many years, and I will be glad to have the support of Deputy MacBride on that whether or not he understands the problem.

Mr. MacEntee

I should perhaps deal, first of all, with two matters raised by Deputy Dillon and Deputy MacBride which are relevant in my view to the matter at issue. The first point is the question put by Deputy Dillon as to why we should regard the Central Fund procedure as more appropriate in this case? The reason is a simple one. Payment can be made out of the Central Fund in fulfilment of a guarantee on the date on which that guarantee falls due to be honoured.If we had not this Central Fund procedure and if the Dáil were not sitting the State would not be in a position to fulfil its guarantee until the money was voted. There is nothing unusual in the course we propose in Section 5. A similar procedure is embodied in the Trade Loan (Guarantee) Acts, a Bill to continue which was passed by this House to-night, in the Irish Shipping Act of 1947 and in the Transport Act of 1950 for which Deputy Dillon and his colleagues in the last Government were responsible.

Deputy MacBride raised the second point to which I wish to refer. As is not unusual when Deputy MacBride makes a statement here relating to any financial or monetary matter, Deputy MacBride was wrong. He said that under Section 6 these borrowings must be repaid in 12 months. Section 6 relates to the payment of any advances made from the Central Fund in fulfilment of the guarantee. If the State is called upon to honour a guarantee which it has given by reason of the fact that one of the scheduled companies has been unable to repay the advances, then the Dáil, by voting the necessary moneys, will have a chance not only to recoup the Central Fund but to discuss the circumstances under which the scheduled company concerned was unable to fulfil its obligations.

Having said that, let me say now that I should hate at this late stage to protract the debate upon the general question of the monetary system and the banking structure—matters which have been raised, in my view, by a side wind on this Bill. I was, however, asked one or two questions and perhaps I should try to answer them. Deputy MacBride asked why were these companies not financed by the Central Bank? The answer to that is simple. They are not financed by the Central Bank merely because, as Deputy Cowan has demonstrated, Deputy Dillon and Deputy MacBride are both humbugs.

Mr. MacBride

That is a complete answer.

Mr. MacEntee

During the period when they were members of a Governmentthere were Emergency Powers Orders made guaranteeing certain companies. One of them was made by Deputy Norton in August, 1948, raising the guarantee given in respect of Fuel Importers Limited from £2,000,000 to £6,000,000, and that Order was signed by Deputy Norton. The Order was, of course, made by the Government of which both Deputy Dillon and Deputy MacBride were members. A second Order was signed in November, 1948, by the then Taoiseach, Deputy J.A. Costello, under which the Government again raised the guarantee given in respect of advances to Grain Importers Limited from £2,000,000 to £8,000,000.

The question naturally arises in view of the speeches of Deputies Dillon and MacBride: Why were those advances not made by the Central Bank? Because, despite all we have heard here during the last 18 months about the conduct of the Central Bank and about the way that it invests the funds for which it is responsible, neither Deputy MacBride, Deputy Dillon nor the Government of which they were members brought in a Bill to amend the Central Bank Act as passed in 1942. I am at a loss to understand why with the views which have been expressed here by the then Taoiseach, Deputy Costello, by the then Tánaiste, Deputy Norton, by the then Minister for Finance, Deputy McGilligan, and by the then Minister for Industry and Commerce, Deputy Morrissey, although he is not so vocal in these matters as some of the other gentlemen —after all he is a business man, he is a practical man who has to deal with practical affairs: he is not a lawyer—

Mr. Hickey

You have just said it.

Captain Cowan

He is a sensible man.

Mr. MacEntee

—he is not a lawyer; neither is he a business man turned theologian like Deputy Dillon—something was not done when they were in office to give effect to their views. We have had not only the pronouncements of Deputy Dillon, but of Deputy Mulcahy, then Minister for Education, of Deputy Everett and Deputy Keyes to the same effect. I thinkthe only man who has not expressed himself in similar terms in respect of this particular matter is Deputy Blowick. Perhaps Deputy Blowick is the nigger in the woodpile. Perhaps he would not agree to break the link with sterling and amend the Central Bank Act to permit Deputy MacBride to make the advances to these scheduled companies about which he is now so anxious and that is why we are now in the position in which we have to come to this House to-day and say that this money can only be got from the commercial banks.

Mr. Blowick

Like the Minister, I was going to join the British Army and I missed the train.

Mr. MacEntee

I know Deputy Blowick is at least a man of weight. I assume he is also a man of influence but I cannot believe it was Deputy Blowick that held up the whole gang and stopped the train.

Mr. Blowick

Was that the train you missed when you went to join the British Army in 1915?

Mr. MacEntee

Now, take your medicine. I cannot believe that for a moment and, therefore, I must agree with Deputy Cowan that after all the real reason why we are in the position that the Central Bank cannot itself advance the moneys to the scheduled companies out of the funds which it has under its control and for which it is responsible is because Deputy Dillon, Deputy MacBride and their colleagues who have talked in such a radical strain since they went into opposition are mere shams and humbugs.

Let us consider another aspect of this matter. We had Deputy Dillon talking about the 1¼ per cent. administrative charges and wanting to know why it was that the join stock banks which were making these advances had to charge more than a mere 1¼ per cent. to cover their administrative costs. I wonder would Deputy Dillon apply that to his own business transactions. After all his book-keeping and his administrative expenses down in Balla-ghaderreen must be comparatively light but I am perfectly certain thathe is not content to seek from his customers in respect of any transactions he may have with them only that amount which just barely covers his administrative expenses.

I do not want to be put in the position of defending the joint stock banks. I do not believe the commercial banks are perfect any more than I believe any other human institution is perfect but I believe they have to work within the system established here, not just by law but by our fundamental commercial relationships. I do not for a moment suggest that they are not capable of improvement. I do not for a moment suggest that the Central Bank is not capable of development and improvement but at least, so long as we have it as a concern, working in accordance with the law which established it, we should at least stop trying to fool and deceive the people and sell to the people gold bricks in the language that Deputy MacBride employs in relation to it and these other institutions.

When he was dealing with them as a responsible Minister he was quite a different man. Let him not try now to dupe and deceive the people who are innocent enough to take him or Deputy Dillon at his face value. When I was listening to Deputy Dillon assuming the role of theologian and beginning to express doubts as to whether it was morally right to charge interest or not, I was just wondering and I began to recall to myself a simple transaction in which Deputy Dillon with Deputy MacBride, played a leading part. I refer to the Marshall Aid Loan under which we began to pay this year interest at the rate of 2½ per cent. to the United States of America. That interest, as I pointed out in this House, because it is not subject to taxation, is in fact equivalent to the rate which we had to offer here in Ireland for the last National Loan, the rate of 5 per cent. I have pointed that out time and time again. Therefore, if it is immoral, as Deputy Dillon almost suggested, to pay 4½ per cent. on advances given by our banks, how much more immoral is it to pay almost 5 per cent. to anothercountry, to the United States of America, in order that we might secure funds on such terms as would enable us to evade due payment of interest until after we had a general election in 1952.

I say that with some significance because do not let us forget that the terms of the Marshall Aid Loan provided that interest would not fall due to be payable until December, 1952. The Coalition took office in February, 1948. It was almost a foregone conclusion that in the ordinary course of affairs they would have had an election in June, 1952. In the meantime they would have the £40,000,000 to spend as a slush fund, as, in fact, they spent it. They were hoping they would come back on the wave of artificial prosperity which was thus created. With the wave of inflation that the expenditure of these moneys would generate they hoped they would be swept back into power. That was the real significance of the Marshall Aid Loan.

Mr. Rooney

What about the £24,000,000?

Question put and agreed to.

Committee Stage ordered for Wednesday 25th February, 1953.