asked the Minister for Finance what criteria are employed in determining Government policy in relation to the control of credit.
Ceisteanna—Questions. Oral Answers. - Control of Credit.
36.
The criteria are implicit in the general aim of credit policy which is, in association with incomes and fiscal policies, to sustain the highest level of economic activity, including employment, compatible with stability of domestic prices and a reasonable balance on external accounts.
I hope the Minister remembers what it says in the Constitution on this.
The Deputy can leave the running of the fiscal and economic affairs of this country safely in my hands.
Deputies
Hear, hear.
I would like the Minister to bear in mind what the Constitution says about this, too.
Is the Minister satisfied with the present system of voluntary restrint being applied by the Central Bank from the commercial banks? Does he not think that in other countries a more compulsory policy of credit control is adhered to and would this not perhaps be better for our economy?
The Central Bank have a number of measures in contemplation which will give a great deal more teeth to their credit policy.
Is the policy that is being encouraged here to reduce the amount of credit available to small borrowers? Is that what the Minister is being asked to do here today?
The Deputy means by the Conservative Party?
Yes.
It is very hard to know what the Conservative Party are up to.
We are not a Conservative Party, I can assure the Minister.
Scarcely a party at all.
(Interruptions.)
Jessie James.
Question No. 37.
I would not like to take any notice of "General" Blaney.
There is nobody taking any notice of you, Deputy. You are lucky to be here at all and you know that.
The generals were here last night.
Will this be in the form of new legislation concerning the Central Bank vis-à-vis the commercial banks or will it be a further use of existing legislation?
Both.
I am calling Question No. 37.
The Minister used the words "more teeth". Would the Minister agree that this can only be taken to mean that those teeth will in fact bite harder and that further restrictions on the availability of credit are now planned?
No, I do not mean that at all. What I mean is that at the present time the Central Bank issue certain directives as to the manner in which credit should be extended——
The availability of credit also.
——the level of credit and so on. At the moment the ways open to them of enforcing those directives are not very satisfactory and they intend, in co-operation and consultation with the various institutions to improve the machinery.
Does the Minister mean that the teeth will be used to enforce those directives so that there will be less credit available? Does that not follow?
To avoid what happened in 1956/57.
The Minister could not answer his own questions earlier. Let the Minister for Finance answer his now. Keep out of this.
The balance of payments deficit was £35 million in 1956. It is now of the order of £70 million.
Order. The Deputy may not make a speech.
From time to time the objects of economic policy may indicate that more credit should be given rather than less. On other occasions there may be a necessity to contract the amount of credit available. It is not necessarily either one or the other.
What applies at the moment?
What I am saying is that we want to bring about a position where, whatever the Central Bank say, whether they say there should be more credit or less, they will be able effectively to ensure that that will be followed.
Does the Minister not agree that the commercial banks and other financial institutions have always co-operated with the Central Bank in this regard and that in fact a mere indication of what was required always brought the desired result?
Deputy Donegan is not right. It is only in comparatively recent years that the Central Bank have taken upon themselves the role of advising on the volume of credit made available to the community. It is a fairly modern innovation. When they came to deal with this problem, to try to ensure that the amount of credit made available from time to time was directly related to the needs of the economic situation, they found that the mechanisms available to them for control were not very effective even with the full co-operation of the commercial banks.
Question No. 37. This question is developing into a debate and we have 125 Questions to be answered.
It is a very important question.
It is but there are other important questions.
Is it not true that the financial institutions have always fallen into line with what the Central Bank required?
No, they have not always been able to do so.
What is being done now? Are they getting teeth or something?
There is a very important factor in the situation which has made the directive power of the Central Bank somewhat ineffective and that is the overdraft system, which operates in such a way that the total volume of credit made available by the commercial banks sometimes is not entirely within their control either.
They are doing their best.
Can the Minister ensure that, in any new arrangements, steps will be taken to avoid drastic fluctuations in the volume of credit so that industry and trade can be assured of a relatively stable flow of credit?
I agree that this is very desirable. In fact that would really be one of the main purposes behind the new mechanisms which we hope to set up, to ensure that the Central Bank will be much more fully in control of the situation with the co-operation of the commercial banks, and able to ensure that the community gets as much credit as it needs from time to time, not too much and not too little.