asked the Minister for Industry and Commerce if he will state (1) the total amount of the present bank overdraft of Tea Importers, Limited, indicating separately the amounts which represent capital advanced and interest charges, (2) what portion of the present increase per lb. in the price of tea is needed for the repayment of the overdraft, and (3) when it is expected that the overdraft will be cleared.
Ceisteanna—Questions. Oral Answers. - Tea Importers, Limited
asked the Minister for Industry and Commerce if he will state (a) the total liability to date on tea transactions by Tea Importers, Limited, specifying (i) how much of such liability has been met by overdraft and how much by other borrowing, and (ii) the interest rates charged and the total interest due; (b) the estimated income required from the new tea price to cover interest and redemption, and the actual amount included in the new tea price for this purpose; and (c) whether the 2/- increase includes a margin of profit for tea wholesalers and retailers, and, if not, what addition to the price will be necessary to cover such margin?
With the permission of the Ceann Comhairle, I propose to take Questions Nos. 8 and 9 together.
As Tea Importers, Limited, have only a nominal capital, bank accommodation has been necessary since the company was set up in 1941 in order to finance the company's purchases of tea. On the 30th September, 1955, the total liability of Tea Importers, Limited, on foot of borrowings for purchase of tea was £5,161,465, which included £1,861,465 due on bank overdraft and £3,300,000 in respect of accommodation bank bills. These borrowings were arranged in the same way as in the earlier years since 1941.
The bank overdraft was subject to an interest rate of 3½ per cent. to the 31st August, 1955, and of 4 per cent. from the 1st September and £20,436 had accrued under this head on the 30th September. The accommodation bank bills outstanding on the same date were discounted at varying rates, the total discount amounting to £60,173.
The increase of 2/- per lb. in the average list price of Tea Importers, Limited, which was announced recently includes 2½d. a lb. towards the recoupment of the trading loss, which arose from the maintenance during the previous 12 months of an average issue price below the economic level and which accounts for £1,070,000 out of the total of the company's liability of £5,161,465 at the 30th September, 1955. It is not possible to forecast the period required for the total liquidation of the loss incurred by Tea Importers, Limited, up to the 30th September, 1955, as this will be affected by the cost of future purchases by the company.
The increase of 2/- a lb. refers to the issue price from Tea Importers, Limited, for original teas. Since 5th July, 1952, the prices of the blended teas which are sold by wholesalers and retailers are not subject to official control.
Would the Minister make clear one point which he has not made clear? According to his statement, the annual consumption of tea in the country amounts to something like 24,000,000 lb. Is he aware that 1d. on the lb. for the liquidation of overdraft and interest charges would produce £100,000 and that 2½d. would produce £250,000 per year? What I wanted to know was: allowing for the payment of interest, whatever the rate may be, how long will it be before the existing £5,000,000 overdraft is paid off? For how many years will interest have to be paid?
It is obvious that the Deputy is confusing two entirely different matters. Since Tea Importers, Limited, were set up as a company, with no capital or a very nominal capital, they have had to resort to bank overdrafts as a means of financing tea purchases. The Government Party of which the Deputy is a member agreed that for the best part of the past 14 years, Tea Importers, Limited should have a bank overdraft of £6,000,000 per year.
Tea on tick, in other words.
Since the company operated, they had to have a bank overdraft and they were allowed to draw on that overdraft up to £6,000,000. That was going on all the years the Deputy's Party was in office, and, in every one of these years, everybody who consumed an ounce of tea paid interest on that overdraft. That is one aspect of the matter. I do not say there is any other way of getting out of the difficulty and I am not complaining. I am merely giving the Deputy information. When we decided, early this year, to hold tea prices, it was necessary for Tea Importers, Limited to increase the overdraft, because they were issuing tea at less than the economic price. The extent of that overdraft for which we were responsible in the past 12 months is £1,071,000 and that overdraft in due course will have to be liquidated. How much of it will be interest depends on when it is liquidated and that cannot be decided until the liquidation actually takes place.
Mr. Lemass
Is it not obvious that the levy of 2½d. a lb. on the price of tea to meet these losses will have to continue for at least four years?
Not necessarily continuing that way, because there is a variety of steps that might be taken in the meantime.
Mr. Lemass
If there is no other step taken, people will be paying for four years for this favour you did them.
If Deputy Lemass can forecast a static world in which there will be no change for four years, and if we decide not to think any differently from the way in which we are thinking to-day, that might happen, but it need not happen.
Might I ask for a clarification with regard to what I call borrowings as distinct from bank overdraft? Was it for 14 years that bills were discounted with the Central Bank, or how long is it since that was started?
I do not think bills were discounted by the Central Bank at all, but if the Deputy wants details, if he will put down a question, I shall be most happy to give the answer.
That was asked in the question.
Why did the Deputy not ask that question last year?
If the Deputy will look at his question again, he will see that the words "Central Bank" are not once mentioned.
If the Minister will look at the question, he will see that I asked about other forms of borrowing, besides overdrafts from the banks.
I have given the Deputy so much information that he has not digested it.
The Minister says he is not sure whether there was borrowing from the Central Bank or not.
No. Can the Deputy not read what I have given him? When he has thoroughly masticated it, he can put down another question, if he wishes.
That is like the Taoiseach's statement last week—I am supposed to know now something which is to come on next week.