Vol. 229 No. 4
asked the Minister for Finance if he or the Government has made, or intends to make, any representations to the Standing Committee of the Irish Banks relative to their not extending to public bodies the facilities normally extended to such bodies prior to 1st April, 1967, namely a rate of interest on borrowings of 1½ per cent below the current bank rate; and if he will make a statement on the outcome of any representations made.
38.
asked the Minister for Finance if he is aware that the reduction of ? per cent in the bank rate which became operative from 1st April, 1967 has not been applied to local authority borrowings; and if this departure from normal procedure is a decision by the banks' standing committee to divert capital available from local authorities to private enterprise.
I propose, with the permission of the Ceann Comhairle, to take Questions Nos. 37 and 38 together.
Following the reduction in the ordinary overdraft rate on 31st March, 1967, I took up with the Irish Banks' Standing Committee their decision to make no change in the rates for special accounts including that for public bodies and local authorities. In reply the committee stated that the changes which had been effected were the result of most careful analysis and were designed to reduce the highest lending rate as much as was feasible whilst at the same time holding the rate applicable to small deposits at 3 per cent.
The banks have made a reduction of ? per cent in all lending rates with effect from 7th June, 1967. The rate for public bodies and local authorities now stands at 6? per cent which is 1? per cent below the ordinary overdraft rate.
Is the Minister aware that, since the questions were put down, certain adjustments have been made but the banks are still charging ½ per cent more than they charged previously to local authorities? Can he take any action in the matter?
I do not think the Deputy's information is correct. I indicated that a change took place on 7th instant. The rate for local authorities and public bodies generally was reduced to 6? per cent. That compares with 6½ per cent on 19th August, 1966.
The local authorities are at a disadvantage where borrowing is concerned relative to the position they were in 12 months ago, for instance.
They are ½ per cent worse off.
They are ½ per cent worse off.
It is ? per cent lower than it was 12 months ago. In August, 1966, it was 6½ per cent. It is now 6? per cent—? per cent less.
In view of the unfavourable impact this is likely to have on interest rates, would the Minister make further representations in the matter?
The rates chargeable to local authorities are down now, since 7th instant, to 6? per cent.
It is the differential which is important.
It is 1? per cent.
Up to recently, the local authorities were always able to borrow at 1½ per cent less than the ordinary borrower. Now, they cannot do that. They are only ? per cent less now whereas, before, it was 1½ per cent less.
The differential is reduced by ? per cent.
The differential was reduced on 31st March, 1967, to 1? per cent.
Can the Minister say if this is confined to local authorities? Does it apply to building societies in respect of house purchase loans?
I am dealing here only with bank interest.
I know that. But does it not apply in respect of bank loans to a building society as well? The building societies have notified borrowers of a proposed increase in interest rates as from July.
I am aware of that but I do not think it is general. Some building societies have indicated that they propose to increase their rates. I do not understand why that should be. The general trend of interest rates is down. My colleague, the Minister for Industry and Commerce, is investigating that particular situation.
It is not merely in the case of building societies. I understand in one specific case that an insurance company is doing the same thing in respect of housing loans.
That should not be.
Perhaps the Minister would look into it?
I have no control over the interest rates charged by either building societies or insurance companies. The question of building society rates is being investigated by the Minister for Industry and Commerce.
