I move: "That the Bill be now read a Second Time."
The purpose of the Bill is to continue the Exchange Control Act, 1954, in operation for a further period of four years. That Act is due to expire on 31st December, 1970.
Exchange control has been in force to a varying degree since 1939, when sterling ceased to be freely convertible into other currencies. The imposition of restrictions on the convertibility of that currency made it necessary for us, in common with the other sterling area countries, to control our payments to and receipts from non-sterling countries. This control was necessary to help safeguard the foreign exchange reserves of the sterling area to which we have access for our requirements of foreign currencies. Foreign exchange has been readily available to Irish residents for all bona fide current payments for a number of years but control of capital transfers continues to be necessary.
Exchange control was first operated under emergency legislation. This was replaced in 1954 by the Exchange Control Act. The Act was expressed to expire on 31st December, 1958, as it was hoped that the need for control would have ceased by that time. As this hope was not realised, the operation of the Act was extended in 1958 and again in 1962 and 1966.
The 1954 Act gives power to control:—
payments to and payments on behalf of persons resident outside the sterling area;
dealings in gold and foreign exchange;
dealings in and the export of foreign currency securities and unregistered sterling securities;
dealings in sterling area securities on behalf of persons resident outside the area;
the export of currency notes and the manner of payment for goods exported outside the sterling area.
The Act also empowers the Minister for Finance to specify foreign currencies which must be sold to a bank so that they may come into the common pool. It further contains power to require the deposit of foreign currency securities and unregistered sterling securities with an authorised depository but it has not been found necessary to bring these latter provisions into operation.
The Act provides for the grant of exemptions by regulations from compliance with requirements of the Act and for the giving of general or limited permissions to carry out transactions. These provisions are being operated so that, as I have said already, all current payments may now be made by Irish residents and such supervision as is applied is designed to ensure that current transactions are not used as a cover for unauthorised capital transfers.
As regards capital payments, persons wishing to make direct or portfolio investments outside the sterling area are not generally permitted to transfer capital for this purpose at the official rate of exchange. Investment currency may be purchased for the purpose but this currency usually stands at a substantial premium over the official exchange rates. Sales of foreign currency securities are permitted but are subject to compliance with certain conditions.
The day-to-day administration of exchange control is in the hands of the Central Bank to which it was delegated in 1965.
The House may expect me to comment on exchange control in relation to the EEC. There is nothing in the legislation to prevent us from meeting the obligations of membership of the EEC. The Treaty of Rome requires member states to abolish progressively restrictions on capital movements between themselves to the extent necessary to ensure the smooth functioning of the Common Market. The progress in this direction to date by the Community has not gone greatly beyond what is permitted under our current exchange control practice. The EEC have, however, liberalised certain transactions which are still subject to close control under our practice. The principal transactions which they have liberalised are direct investment in business undertakings and the purchase of publicly quoted securities.
Under our exchange control legislation as it is proposed to continue it in the Bill we will be able to give effect to EEC liberalisation measures as desired. This can be done by making suitable amending regulations and giving necessary permissions. As far as can be foreseen at present, the legislation should be adequate vis-à-vis the EEC. It may, however, emerge that changes will be necessary or desirable in the light of the terms settled for entry into the Community or of developments in the Community itself.
Whatever the future may hold, there is no immediate prospect that sterling will become freely convertible on capital account. It is clear that we need to retain the 1954 Exchange Control Act. I am asking the House to agree to its extension for a further period of four years and I recommend the Bill for approval on this basis.
