Dáil Éireann debate -
Thursday, 1 Mar 1956

Vol. 154 No. 8

Committee on Finance. - Adjournment Debate—Government Borrowings.

Mr. Briscoe

To-day I asked the Minister for Finance:—

"If, with reference to the item ‘Other Borrowings', amounting to £5,000,000, in the statement of receipts into and issues out of the Exchequer published in Iris Oifigiúil on 21st February, 1956, he will state in detail the sources from which this amount was borrowed, the rates of interest and the dates of borrowing and repayment in each case.”

The Minister replied:—

"The information sought by the Deputy is in the form of a tabular statement which, with your permission, I propose to circulate with the Official Report."

I indicated immediately that if the information appeared to me not to be satisfactory, to the extent that it required further discussion, I would raise it on the Adjournment, and you have permitted me to do so.

It is rather a surprise because these sources of borrowing are quite novel. As far as I know, there has been no precedent for the State borrowing either from C.I.E. or from the E.S.B. I was, therefore, interested, when I heard rumours to the effect that the State had borrowed from the E.S.B., in ascertaining to what extent this was based on fact, and the terms and conditions attaching thereto. When I got the answer which the Minister promised would be accurate, I must say it was more than accurate.

Minister for Finance (Mr. Sweetman)

And it is accurate.

Mr. Briscoe

I am not disputing that. It was more than accurate because it gave me a further surprise. I was not aware that the State had resorted to borrowing short-term from C.I.E. It was only last May, I think, that C.I.E. went for a public loan and the terms and conditions of that loan were that it cost C.I.E. certainly not less than 4½ per cent. per annum on the money it borrowed. While C.I.E., in borrowing and in the issue of its prospectus, made no reference to the fact that it would indulge in discounting Government Bills or accommodation loans, I find nevertheless that this institution has lent all the money it borrowed at 4½ per cent., £2,250,000, at 3? per cent. To add to the peculiar situation, if I remember correctly, the loan for C.I.E. was not fully subscribed and the Minister for Finance himself was one of the parties to the underwriting, together with the banks, of the unsubscribed part. Here we have the Minister underwriting a loan for a company from whom he was going to borrow immediately they got this money and at a rate of interest which produced a loss for them over the period the money was lent.

I do not think that C.I.E. should be treated in that way. If the Government found that it was not convenient to go for a public loan at the particular time it needed money to fund its own debts or to secure money for other capital purposes, at least it might have said to this subsidiary institution which in my opinion has very little free choice when called upon for transactions of this kind: "We will see that you have no loss to your institution on the moneys you lend to us." It does seem strange that the Minister for Finance, who purports in a prospectus to be the underwriter for the issuance of a loan by C.I.E., should, at the same time, be a borrower from the company whose loan he is underwriting.

Is it fair that the loss in this case, whether it is big or small, should fall on the backs of possibly the users of the buses or of other transport, or is it going to be another instance of an item to be discussed when wages and employment conditions are being discussed? As far as C.I.E. is concerned, this was a surprise to me and I believe it is without precedent.

Mr. Sweetman

Then the Deputy believes wrong.

Mr. Briscoe

The Minister can tell us when it was done before. I have no knowledge that C.I.E. had done this before.

Mr. Sweetman

The Deputy should have consulted my predecessor before he started this hare.

Mr. Briscoe

The Minister will have an opportunity of telling us the position. As long as I know anything about C.I.E., certainly up to comparatively recently, it had a deficit every year and the State had to make up that deficit, partly by grant and, to a certain extent, by loans for capital development. I have yet to know when C.I.E., before the advent of its public issue, had a substantial amount of money of this nature in its coffers to lend to the Government for a period of from six to eight months.

Now we come to the E.S.B. I wonder has this a precedent? Has this been done before? The loan to the Government by the E.S.B. coincides with its public issue, again an issue the prospectus of which had on it the words: "Underwritten jointly by the Minister for Finance and the banks." When this matter comes to be examined, I think it will be looked upon as a kind of farce. It will reduce the dignity and the value attaching to the underwriting commitments of the State and the Minister for Finance.

As I said, such a subsidiary institution of the State can have very little choice because of the provisions in Acts of this House. Every new operation is dependent upon, if you like, a sanction from the Minister, who controls it. When they go to the Government and, in the words of the chairman of that institution, agree to pay a realistic rate of interest, it becomes 5 per cent., the rate which the Minister for Agriculture described as the interest that would be payable only by a banana republic.

Again, we borrowed from them at 3½ per cent. I do not know anything about the Hospitals' Trust Board and I do not even know at this moment whether this is the hospitals' money that is invested with the Minister, or given to the Minister, or whether this is a private concern, and I, therefore, do not wish to discuss it. In any event, the amount involved is considerably smaller and it is within the right, I would say, of an outside body, an independent body, if it has surplus money, to advance it on short term or long term to the State, as it sees fit.

I am not quarrelling with the principle of the Government discounting bills at home or borrowing on short term at home. I would prefer that they should do that, even if they gave a lower rate of interest to the people concerned, than that they should go to London and borrow there at short term rates at either a lower or a higher rate of interest, although these people would have to invest their money at, say, 4 per cent. across the channel.

I have said, Sir, that I should like the Minister to indicate when this procedure was adopted before, to what extent it was done and what the terms and conditions were, the rate of interest, and whether the moneys that these institutions had were in the coffers to their credit or whether they were, in fact, while carrying out that transaction, in overdraft with their bankers. The Minister might give as much detail as he can in regard to this matter. If he likes to satisfy me, he should answer the points that it is of importance should be understood and appreciated.

I intend to give the Minister longer than the usual ten minutes in which to reply. In conclusion, I want to say that it was not publicly known that these transactions took place, but, as in everything, the rumour began to trickle out and to spread. Sometimes rumour magnifies. I was, for instance, misled to the extent that I understood the borrowing from the E.S.B. was to the extent of £3,000,000. I now see that it is to the extent of £2,250,000. The Minister ought to clarify this matter as much as possible in order that the public will understand what this is all about.

Mr. Sweetman

One might understand and accept a person who is innocent in financial matters making the speech we have just heard from Deputy Briscoe.

Mr. Briscoe

Let us not be personal.

Mr. Sweetman

Nobody, however, could accept that Deputy Briscoe was such an innocent in relation to public finance. Of course, what occurred in this case, and what occurred during my predecessor's time before that, was a perfectly obvious and proper transaction. Deputy Briscoe asked, first of all, whether this ever happened before. It did. On 30th January, 1954, when Deputy Seán MacEntee was Minister for Finance, the sum of £1,000,000 was borrowed from C.I.E.

Mr. Briscoe

On a point of order. That is not correct. That was a repayment from C.I.E. for money advanced.

An Ceann Comhairle

That is not a point of order.

Mr. Briscoe

It is a correction of a misstatement of fact. That is not true, Sir.

Mr. Sweetman

Deputy Briscoe ought to learn a little sense.

Mr. Briscoe

That is what you tried to make it out to be.

Mr. Sweetman

The Deputy ought to learn a little sense. The fact is that, on 30th January, 1954, the Minister for Finance of the day, Deputy Seán MacEntee, borrowed £1,000,000 from C.I.E., repayable as to £500,000 on demand, repayable as to the balance of £500,000 on 31st August, 1954. The difference between the transaction then and the transaction now is that, in respect of the first £500,000, Deputy MacEntee agreed to pay C.I.E. 1¾ per cent. and, in respect of the second £500,000 he agreed to pay C.I.E. 2 per cent. but, in respect of this transaction, the rate is 3? per cent.

Mr. Briscoe

No difference!

Mr. Sweetman

That was the transaction that was carried out by my predecessor and, let me say, perfectly clearly and categorically, that it was an entirely correct thing for my predecessor to do. I stand over it as being a correct thing in every possible degree.

What happened in respect of the incident to which Deputy Briscoe has directed attention in his question? He asked a question. He got all the information he asked for. Now, apparently, he thinks—as I have said, incorrectly —that it never happened before and, because he thinks he knows everything about the affairs of C.I.E., he does not even accept my word. I can tell him that the transaction did happen before. It did, of course.

Mr. Briscoe

We will let Deputy MacEntee answer that.

Mr. Sweetman

What happened, of course, was that after the previous issue C.I.E., having got the funds on their issue, had money available that they did not require for the moment. What happened in respect of this transaction? If Deputy Briscoe looks it up, he will find the Minister for Finance in respect of the issue concerned did not contribute to that issue of C.I.E., that it was underwritten by the banks. I am talking off the record in that respect but I think he will find I am right. What happened in respect of the E.S.B. issue was exactly the same. The two bodies concerned went to the public for their issue. They wanted that issue to carry them over on a planned development over a period. That planned development over a period meant that they would be expending the moneys subscribed to the two issues—by C.I.E. and the E.S.B. respectively—over a period of months and that over a period of months from the date of their issues they would have, following the success of their issues, funds that they did not immediately require.

What were they to do with these funds? Leave them in the bank earning no interest? Put them in the bank on deposit rate at a lesser rate than this, as the rate was at the time? If that were done, the bank would have the pleasure of lending it back to the Government and getting a profit, the difference between the two funds, on the transaction. Take the E.S.B. issue at 3½ per cent. If that £2,250,000 had been put on deposit by E.S.B. with the bank they would have got 2½ per cent. from the bank and the commercial banks would have then lent back the same moneys to the Minister for Finance at the same rate of 3½ per cent. and, on Deputy Briscoe's method of carrying out the finance, 1 per cent. would have inured to the benefit of the commercial banks and would have been lost to the E.S.B.

Mr. Briscoe

You should have paid the rate of interest at which they borrowed.

Mr. Sweetman

There was another alternative open to them. Perhaps Deputy Briscoe would have wished that the E.S.B., instead of putting it on deposit in the banks here, should send it to London and put it in Treasury bills.

Mr. Briscoe

I said that they should not do that. I said that you should pay the same interest as they paid.

Mr. Sweetman

That was another possibility. I gather that Deputy Briscoe leaves that out of account.

Mr. Briscoe

Of course I do.

Mr. Sweetman

The position was perfectly simple. The E.S.B. on the one hand, C.I.E. on the other hand, the Hospitals' Trust Board, for the third, all had two perfectly simple and perfectly free alternatives open to them. One alternative was to put the money on deposit and draw the deposit rate. If they had done that, the banks, having received the money, would have re-lent it to the Government at the higher rate of interest.

The second alternative was that the bodies concerned would have lent the money to the Government at the exchequer bill rate which is higher than the deposit rate. In the case of the E.S.B. issue, it is 1 per cent. The Government lost nothing, because it is paying to these bodies the same rate of interest as it would have to pay to the banks on exchequer bills, but the bodies themselves gained 1 per cent. in the case of the last two of them and a fractional amount in the case of the first one.

One per cent., even for a broken period, on £2,250,000, is a very substantial sum, and I am not prepared, even though Deputy Briscoe requests, invites and demands, supported by the Irish Press, to lose that 1 per cent. for the E.S.B. when we can get it for them by way of a method started by my predecessor and of which I fully approve.

The Dáil adjourned at 10.55 p.m. until 3 p.m. on Wednesday, 7th March, 1956.