asked the Minister for Finance whether, in view of the mounting unemployment and of the business recession which is preventing an expansion in production, the Government will request the commercial banks to relax the present credit squeeze as a matter of urgency.
Ceisteanna—Questions. Oral Answers. - Relaxation of Credit Restrictions.
I cannot accept the implications of the Deputy's question.
Credit may be made available within the State by the commercial banks through loans and advances, investments and the discounting of bills. To put the matter in proper perspective I propose to quote the amount so lent within the State by the commercial banks at mid-October in recent years. The figures are: 1953, £153.4 million; 1954, £166.8 million; 1955, £193.3 million; 1956, £195.3 million.
The readiness of the commercial banks to extend accommodation to credit-worthy customers is limited only by consideration of the liquidity requirements established by banking experience and practice. Between 1954 and 1955 bank lending within the State increased at an exceptionally high rate. The figures I have quoted show an increase of £26,000,000 as compared with an increase of £13,000,000 between the corresponding dates of 1953 and 1954. During 1955 the deficit in the balance of payments increased, the external reserves of the banks were sharply drawn down and their liquidity ratios were reduced. In view of this, transfers of sterling have been made to the commercial banks by the Central Bank to facilitate advances for essential transactions which otherwise would have added unduly to the strains on banking liquidity. These transfers and the substantial sales this year of sterling investments of departmental funds have sustained the lending capacity of the commercial banks. The amount of bank lending within the State has in fact increased as between October, 1955, and October, 1956, notwithstanding the decline in the need for bank accommodation to finance imports consequent upon the fall in imports of £16,000,000 in the ten months January to October, 1956.
It would be consistent with Government policy that the banks should adopt a cautious attitude towards applications for credit which may be intended to sustain an unduly high level of imports of less essential consumer goods but that credit should be available for productive purposes to the maximum extent permitted by available banking resources.
According to the latest returns available to me, which are contained in the October issue of the Central Bank bulletin, advances to manufacturers by the banks were cut down by £6.2 million from the l7th January of this year to the l7th July of this year?
I have not got that information in front of me but it is a fact that the appropriate total to consider in relation to credit should be loans, advances, investments and the discounting of bills. That total has gone up notwithstanding the fact that this year imports have not had to be financed to the same degree because of the decline in imports. It is also a fact that what we need is to extend the total pool of savings resources that we would have so that there would be sufficient in that pool for all factors of the economy, private and public.
Do I understand that the effect of the Minister's reply is to suggest that there is not any credit squeeze?
I intend by my reply to make it clear that there are not sufficient resources available through savings for all the capital developments that everybody would consider desirable.
With regard to the Minister's statement that bank advances and investments have gone up, how much of that has gone directly to the Government by way of participation in loans and ways and means advances, and by how much has the credit advanced to industrialists and farmers for productive work declined because of the increase in the Government supplies?
The total that the public and private sectors can take out of the pool is only the total that is in the pool.
The Minister has taken it out of it at that rate.
If the pool was increased in accordance with the savings campaign initiated by the Government, then many of these difficulties would not arise.
The Minister is blaming everybody except himself and it is he who is to blame.
Is the Minister aware that in connection with an individual who went to a bank manager down the country for a loan the bank manager told him he had instructions from his head office not to make advances? Could he say if that is not to be construed by the ordinary person in the country as a credit squeeze?
I am not aware that any bank manager so stated. If the Deputy can produce evidence to me I will examine it carefully.
I will produce it.
What did the Minister for Education say in relation to schools?
Was it for productive purposes?
For industry.
The emphasis should be on productive purposes.