I move that the Bill be now read a Second Time.
The annual Appropriation Bill is the statute in which the Votes for the various Supply Services are formally appropriated. As Deputies know, it is normally passed without debate.
Committee on Finance. - Appropriation Bill, 1966: All Stages.
Leave granted to introduce a Bill entitled an Act to apply a certain sum out of the Central Fund to the service of the year ended on the 31st day of March, 1965, to appropriate to the proper supply appropriate to the proper supply services and purposes the sums granted by the Central Fund (Permanent Provision) Act, 1965, and this Act, and to make certain provisions in relation to the Post Office Savings Bank and Trustee Savings Banks.
—(Minister for Finance).
Agreed to take remaining Stages today.
I do not want to interrupt the Minister but at least let us observe the normal procedure. The theory of this House is that a Bill cannot be printed or circulated until the First Stage has been moved and passed. I understand that we have passed the First Stage of the Appropriation Bill. We should wait until it has been circulated before discussing the Second Stage. In theory, it has been printed only in the last ten seconds.
That is instant Bills and instant Taoiseachs.
I trust the Deputy has now been provided with a copy of the Bill.
I am much obliged to the Leas-Cheann Comhairle for that courtesy.
As I said, this Bill is normally passed without debate as the services covered have already been discussed when the individual Estimates were taken.
This year, however, there is one matter not already discussed. As indicated in reply to a question on 26 October last, I am availing of the opportunity afforded by the Bill to provide for an increase in the interest rates of the Post Office and Trustee Savings Banks.
The rate paid to depositors by these banks has never before exceeded 2½ per cent. Interest rates generally have now moved up however and the commercial banks are paying 3½ per cent on thrift deposits. It is desirable to bring the savings banks' rate into line. Section 3 contains the necessary provisions. I propose in addition to make suitable provision in next year's Finance Bill for the continuation of the concession under which interest on the first £2,000 of savings deposits or the first £4,000 in the case of a man and wife is free of tax. With this concession the grossed-up value of the 3½ per cent interest will be £5 8s. per cent. This is a very attractive rate and I hope that its introduction will lead to a big increase in savings bank deposits.
It is proposed to introduce the new rate as from 21 December, 1966, in the case of the Trustee Savings Banks and 1 January, 1967, in the case of the Post Office Savings Bank. These are the most convenient dates having regard to the accounting years of the banks.
The cost is estimated at about £1.3 million a year.
The five Trustee Savings Banks at present operating in the State are obliged by statute to invest their funds with the Minister for Finance at a rate of interest not exceeding 3 per cent. It is proposed to increase this maximum to 4 1/10 per cent to cover the increase of 1 per cent which will be payable to depositors and an increase to 12/- per cent of the maximum allowance of 10/- per cent in respect of the management expenses.
I would like to take this opportunity to express my appreciation of the valuable work of the Trustee Savings Banks. The Committee members voluntarily devote much of their time to the promotion of national savings. They deserve the thanks of the community for their important and fruitful work.
I want to ask the Minister whether the income tax concession in respect of the interest payable on the first £2,000 deposited extends to super-tax. In the case of two people, a man and his wife, is their joint income liable or would they be entitled to receive interest on a deposit of £4,000 in the Post Office free of income tax and surtax?
I am only sure about income tax.
The second point to which the attention of the House should be drawn is the fact that too many of us are prone to forget that this represents £1 million per annum on the Central Fund charge for the service of debt. This is a charge which is steadily creeping upwards. I think £1 million is at present enough to provide 2/6d a week for the non-contributory old age pension. Can the Minister recall what the relevant figure is?
This year 5/- for the non-contributory people without means cost £250,000.
That is only about one-fifth. Even one-quarter then would provide nearly 5/- a week for the non-contributory old age pensioners and the blind pensioners. We are now, owing to the stress of circumstances, which we are wisely meeting by allowing the Post Office Saving Bank to meet the competition of the joint stock banks adding to the Central Fund annual charge the equivalent of almost 5/- a week to the non-contributory old age pensioners.
One other facet on which I should like to hear the Minister is that it is common knowledge to anyone concerned with matters of this kind, and to the Minister himself, that the banks are themselves forced into competition with themselves by the establishment of finance companies. Because of the fact that the rates they are prepared to allow on deposits with themselves have got quite out of touch with the current market rates, the joint stock banks are establishing finance companies offering for deposits threequarters of one per cent less than the current rate charged on overdrafts, which at present is something of the order of 6¼ per cent net. Now we are allowing this body here to pay 3½ per cent free of income tax which works out at £5 12s for a person paying——
£5 8s.
—for a person paying income tax at the rate of 7/- in the £. How this will compare with what is available in the finance companies operated by the joint stock banks I am not prepared to say but I think it falls one and a half per cent short. The Minister will have to keep in his mind that the banks themselves cannot get money at the current deposit rates and have been forced into the finance companies in order to get them. I hope he will have better luck. This is going to cost us 5/- a week on the old age pension.
There is just one point. This does not actually fall on the debt service charge in the Central Fund. This increased interest will be paid out of the Post Office Savings Bank Fund. In other words, it will be met by the income from the various Government's stocks in which the resources of the Post Office Savings Fund are invested. The Post Office Savings Bank is in that respect a self-contained operation. It is entirely necessary to do this because if we want to keep the Trustee Savings Bank and the Post Office Savings Bank in the market for savings, and if we want to ensure that they continue to attract small savings to the extent we would like them to, we have no option but to go with the tide of rising rates of interest which is with us at present and increase the rates to the extent we are increasing them.
Question put and agreed to.
Bill put through Committee, reported without amendment, received for final consideration and passed.
This Bill is certified as a Money Bill in accordance with Article 22 of the Constitution.
The Dáil adjourned at 10.10 p.m. until 3 p.m. on Wednesday, 14th December, 1966.