Does Section 12, in effect, mean that the board cannot reinvest their redemption fund pending the redemption date in further extensions? Does it mean that it must be set aside in fluid cash or can it be re-invested as I think the board have been re-investing at the moment their depreciation amounts?
Committee on Finance. - Electricity (Supply) (Amendment) Bill, 1953—Committee and Final Stages.
The board are not authorised by this to invest in their own securities—if that is what the Deputy has in mind. The redemption fund must be held in securities approved by the Minister for Finance, other than their own.
Is that necessary?
We think it is the safer course and one that investors would prefer.
Is not the real guarantee here the guarantee of the State, that the State will not see the investments of the board go broke?
That is so but, nevertheless, we believe that, on the whole, the investor in a dated stock of this kind would prefer to be assured that there is a regular appropriation to a redemption fund which is not utilised in the business in which the money was invested, that it is held in trustee securities easily realisable, which would enable the redemption contract to be fulfilled on the due date.
Is not the position in the case of ordinary Government securities where they are dated and where there is a definite amount put aside, that it can be utilised either for the purpose of buying in stock, normally, or it can be invested otherwise in Government securities? Surely what you are trying to do in this Bill is to put the E.S.B. in the same position as the Government—in a very limited sphere I agree. Does not it seem that the real guarantee for the investor will be that the State will ensure that there is no default in the board's security and does not it seem that it is providing rather unnecessary duplication—to put it no stronger—that if the board in the first year in which they set aside this amount want to borrow on a longer term £100,000 and have to set aside £100,000 that they have to borrow a new £100,000 and set aside the old £100,000 in Government security?
I do not deny that the course that the Deputy is arguing could be justified. In fact, I think the board would prefer that course—would prefer that the Bill would have allowed them to buy and sell their own stocks. But, on the whole, we think, particularly at this stage when we are making the transition from the financing of the E.S.B. by the Exchequer to financing by public issues, it is wiser to adopt the more conservative course which this Bill contemplates and which provides for the regular appropriation to a redemption fund of whatever amounts the board decides to appropriate for that purpose.
The board are entitled under sub-section (3), clause (b) to buy in the security in question. Is not that so?
With the consent of the Minister for Finance, yes.
Oh yes, with the consent of the Minister.
No. Clause (b) says that "the board shall not purchase any security at a price exceeding the sum..."
They can only buy, exceeding par, with the consent of the Minister. I understood the Minister to say a second ago that they could not buy their own securities. I think they can because, if they cannot, I do not see what clause (b) means.
They can buy in their own securities for the purpose of cancelling them. They cannot buy in their own securities for the purpose of dealing in them. In other words, they are not given liberty to play the market with their own stock—if I make the position clear to the Deputy. They can only buy in for the purpose of cancelling the stock.
Supposing the E.S.B. have 1954 stock and, in 1957, are issuing new stock and have a sum in their redemption fund, can that sum be invested in the 1957 stock with the consent of the Minister for Finance?
I know it cannot without the consent of the Minister for Finance.
They can only buy their own stocks on the market for the purpose of cancelling them and wiping out the liability. I think that is the way the Department of Finance operates the redemption funds for Government stocks.
They buy for the purpose of cancellation.
Otherwise, how do the Department of Finance take portion of a new loan, for example?
There are various statutory funds, such as national health funds.
I think redemption funds are utilised in the same way, too. It is a matter that will hardly arise until the E.S.B. have issued some stocks and we will have plenty of time between this and then to discuss it, whether we are on the same or on different sides of the House.
I think, on the whole, the public would prefer to be assured that the E.S.B. cannot play the market with their own stock—at least in the initial period.
Does this section mean that this is a forerunner of a similar Bill putting all local authorities in the same position?
The Government recognises that the Public Authorities Protection Act requires either to be amended or repealed. As far as I know, the E.S.B. have never availed of that Act to protect themselves against legal actions and we do not think they should.