Central Bank Bill, 1969: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

Last night I just had time to make a few introductory remarks about the circumstances which obtained in this House when the Central Bank Bill, 1942 was under discussion. It was extremely interesting to watch the line-up in the House at the time. I remember making a list of what the range of opinion was. It was extremely interesting, moving from the extreme right, the most conservative people in the House, to the extreme left, the most progressive people in the House. The two most conservative people, though they were pushed hard by the then Taoiseach for the honour, were the then Minister for Finance, the late Deputy Seán T. O'Kelly and the then Leader of the Fine Gael Party, Deputy W. T. Cosgrave. At the other end of the spectrum were Deputy James Hickey of Cork and Deputy Patrick McGilligan who, to my mind, was the only person in the House who showed any real knowledge of modern monetary matters which I understand he had been studying for some time. There was a full day spent on Second Reading which is about what we have today but this did not satisfy the then Taoiseach so he made a Second Reading speech on Committee Stage and then the real rumpus started. There were Second Reading speeches for ten days. I hope that will not happen this time.

What was asked in general at the time was whether this was a central bank at all. This was the general opinion. I must be fair. This Bill certainly is an attempt to establish a central bank but it is not really what is in a Bill or an Act that counts, it is the approach of the people who run an institution and in the 1940s and 1950s the directors of the Central Bank and in particular the governor had a completely wrong attitude. For example, there was the attempt by the Central Bank to ensure that the Government would be unable to spend the Marshall Aid moneys, the moneys that came from the US, which of course was given way to on paper in the sense that the moneys were put into the Central Bank and then the Government proceeded to borrow them systematically out of it. Mr. McGilligan being Minister for Finance at the time, took great care of these moneys and when he left office there was £25 million in cash left in the Central Bank of Ireland. This was gone in six months by that remarkably conservative Minister for Finance, Deputy Seán MacEntee. He got rid of £25 million in six months. Then he had his savage Budget in the year 1952 which pushed this country into grave difficulties for nearly ten years until Deputy Seán Lemass, when Taoiseach, changed feet in the matter. I regret to say that I could give a number of examples of this. Conversion schemes are in the air at the moment. They are not being very successful now. However, the then governor, in the year 1950 or 1951, persuaded the Department of Finance that where people did not make application they were to be paid in cash. The trouble in 1971 is that too many people are asking for payment in cash but I am speaking about the approach.

The reports of the Central Bank of Ireland during the 1950s were deplorable documents in the manner in which they criticised the capital programme of the Government, a very modest capital programme indeed and a very much more effective capital programme in the sense that there was not nearly as much waste in it as there is in the present capital programme of the Government.

Again, during the late 1960s the attitude of the Central Bank directorate was all wrong. There has been no worthwhile criticism of the galloping Government expenditure. I drew attention to this on last year's Budget debate. The Central Bank should have been in an altogether better position than I was, and indeed I suspect they were, to talk about Government expenditure in last year's report but did they do so? Oh yes, they did, in a sense, but their real attack was directed against the wages of manual workers, the incomes of the lowest paid people in the community. In equity I should say that the present governor of the Central Bank did surface at last a couple of months ago, in November I think, and he did criticise the Government expenditure but how was it that I, with none of the resources that the governor of the Central Bank has, was able to speak about it in May last?

The annual report was dated 15th July, 1970 and among the more remarkable statements in it was this:

For 1970-71 there has been a reduction in the rate of increase in public capital expenditure, but it is to be feared that this will be offset on the current expenditure side.

That is a very modest statement indeed. The first part is wrong because there was in fact no reduction in the rate of increase in public capital expenditure. Secondly, it was not a question that it was to be feared that there would be an increase in expenditure but it should have been patently clear by the 15th July, 1970, that there would be an astounding increase in the Government current expenditure as it is so turning out.

This Bill is quite clear. That is to say, the Bill is well drafted but it is not what is in the Bill that is the nub of the problem. The nub of the problem is, in fact, the relations between the Central Bank of Ireland and, I might add, the commercial banks, and the Government of this country. I cannot do better than give an example from the evidence before the Macmillan Committee which sat in England after the second world war. The Secretary of the Treasury was giving evidence before the committee. One of the members asked him to tell them how the war was financed. The Secretary told them that on each Friday he went down to the Bank of England and had lunch with them and after lunch told them how much he wanted. He was asked in another question whether he was ever refused and his answer was "I was never refused". So far the present Government here have never been refused but there is a big difference here. The Government here are paying the commercial banks nearly 9 per cent, on the Minister's own admission, 8 15/16 per cent, on last major borrowing from them in March of last year—£25 million—whereas the British Government cut the rate from 10s per cent per annum to 7s 6d per cent per annum. The answer the Minister gave in reply to a supplementary question of mine last year was "it was the going rate". What does the Minister mean by that in this context? This money was not borrowed on a long-term basis, in the way the Government are trying to borrow from the public at 9 per cent. The £25 million for which the Government paid the commercial banks nearly 9 per cent was borrowed for three years in March, 1970. This phrase "the going rate" reminds me of the auctioneer with his words, "going, going, gone". Is the Minister aware that at this moment the official bank rate, not the rate at which people can borrow, is 7¼ per cent and that the Canadian rate is under 6 per cent? What is the reason for this? The reason is that the Government are taking altogether too much of the credit resources of the country for their own purposes.

There is comment in the Minister's speech and in the Bill about the Central Bank being empowered to give directions to the commercial banks. It gave not exactly directions, because they have not that power yet, but they indicated what they thought should be the increase in the available credit in this country during the past year, and this was to be £75 million. The Central Bank told the whole community that the Government were to get £50 million of that £75 million and that all the people carrying on all the business of the country were to get was £25 million. I have no doubt that arising from the closure of the commercial banks the public helped themselves to more than £25 million in spite of the bad bet which the Government made when that strike was allowed to develop. The Government allowed the strike to develop without intervention because they favoured bank closure in the belief that the economy would be damped down.

Just for the record, that is not so.

I could not expect the Minister to say anything else. We are each on the record.

No one can be believed nowadays.

I do not believe the Deputies over there.

The low standards in high places are on those benches. We have unmitigated perjury now and not treachery.

Of all the useless efforts I ever saw in my life the effort of the arbitrator was the worst. He was pushed in. I could make an addition about that because he is around the Government nowadays. He could have fixed that closure without difficulty if he was worth a thraneen. He was not worth twopence. As a result of all this we have bankruptcies. Instead of a move towards full employment even in the year 1980, we have more and more workers being thrown out of employment. We have the case of Hibernian Transport, Murphy Bros. in Cork, and the cattle dealer case in Cork. Was the obvious panic in official circles to bring the bank closure to an end when the final vote was taken which it was believed would be accepted but was defeated—and I saw panic then—because of the position of the Hibernian Transport which had filtered through at that stage, whether through the Central Bank or the Department of Finance? It was obvious to me that there was a wave of panic at the end of the bank closure. How many more firms will be ruined? The fact is that we had no Government last year in this country. Instead, we had circuses. We are not an empire like the old Roman Empire which had an official store of bread or wheat and continuous surpluses to keep the ordinary people dazzled while the corruption of their rulers was rampant. We had the circus of the Seven Days Tribunal; we had the Arms Trial; now we have the present continuous circus around the corner of this building.

The word "circus" should not be used in regard to the Government.

I think Deputy O'Donovan should apologise to the circuses of the country.

It might help if he got back to the Bill.

All this is to divert the attention of the people from two matters—the serious financial position and the Government's own difficulties. The extent to which the recent conversion scheme was a failure was alarming because of the extent to which the people took their money in cash which, considering the variety of offers in it, showed clearly their lack of confidence in the present Government.

Three times in the Minister's speech the words "integrity of our currency" occur. On the first page there is a phrase "safeguard the integrity of our currency". What do these words mean? If they have any meaning at all it is to preserve the purchasing power of the currency. This is the only meaning they can have. One must ask how far have the Central Bank as it has operated in recent times safeguarded the integrity of the currency? Ten per cent was the rate of inflation in recent years. Indeed, as I pointed out, the Central Statistics Office produced a ludicrous rate of 7.4 per cent for 1968. It has been 10 per cent per annum over the last three years. That is the answer to the question: how far has the Central Bank safeguarded the integrity of the currency?

There are other answers apart from the arithmetical answer. We have the activities of the farmers' organisations representing the farmers, the constant interruptions of industry and commerce and the discontent among serious salaried groups. On the second page of the Minister's brief there is a rush of words which would not have happened if the present governor of the Central Bank had not been looking after the brief. The Minister runs from the legal tender note fund to the general fund of the banks, in one sentence. In the earlier part he says that "in addition to sterling, it now holds gold". At one time it was all sterling or sterling securities. Mind you, as I said in this House already it has got rid of most of our gold. The £30 million that we had a few years ago may not have been the largest hoard of gold ever put together in a small country but it was worth something. It was down to £11 million by 30th September last year. This was obviously a decision taken, I presume, with the concurrence of the Government as though gold were some kind of fetish, or some kind of absurdity. I heard one economist saying that great progress had been made in economics over the last ten years. I do my best to keep in touch with current economic writing and, frankly, the number of worthwhile ideas that have come up in the last ten years is nebulous. In fact, about the only worthwhile idea that emerged was that at last macro-economics is being analysed and being found out to be what it is, just a system of arithmetic with little or nothing to do with real economics.

Does anybody believe that humanity has had regard for gold for thousands of years without there being some serious advantage in it? Originally when the Currency Commission was established, following the report by the committee presided over by Professor Henry Willison of Columbia University in 1926, we decided in favour of what were called the gold exchange standards because, as a member of the commission told me, we would gain interest on the moneys and we would be one remove from the gold standard on which the British were. When the pound was devalued four years later we had lost three or four times what it would have cost us to have backed our currency with gold. To this very day even though the price of gold is kept down for the silliest of reasons by the people who are trying to get the Vietnamese to deal with the Chinese—the Vietnamese, having dealt with the Chinese for 2,000 years without their help at all—these people have decided "We are going to keep the price of gold at what it was in 1935, 35 dollars an ounce. The dollar is as good as gold." Of course the dollar is not as good as gold because the purchasing power of the dollar now is about one-third of what it was in 1935. I do not know whether the price of gold was correctly fixed in 1935 but I presume the people who did the job knew something about it.

The Minister also said:

In 1965 the bank commenced the issue of guide-lines to the Associated Banks on domestic credit creation. This is now an important function.

Yes, and of course this Bill is going to enable that function to be implemented with more strength. We come back then to where the Minister in one paragraph puts together a reference to something which is extremely desirable—the creation of a money market in Dublin; there is no question that the efforts made in that direction are to be commended—but in that same paragraph there is a reference to the issue of Exchequer Bills to the bank at more frequent intervals, in other words accelerating the pace of inflation and nothing else. In the next sentence it is stated that money that was formerly placed in London is now being placed at home and a native money market has been initiated with the Central Bank playing a role of increasing importance. I do not think any reasonable Irish person would see any fault in this.

The Minister also states that under the present Bill many new powers and duties will be conferred on the Central Bank. However, it is not the powers and duties that are conferred on people that is the important matter—it is how they operate them. It is stated in the Minister's speech that it is a major objective to give greater protection to persons depositing money in banks and finance houses. The truth of the matter is that at the present moment there is too much printing of money in this country. It is absurd to pretend that the Central Bank has any power to control the situation because as inflation goes on the commercial banks must supply more money to their customers. Of course, they have an unending supply of paper against which they will get £10 notes. There was a time before the war when we used only £ notes and a £5 note was rather like a battlecruiser in comparison to the minesweeper. While the banks were closed the most common note in circulation was the £10 note and even £50 notes were put into circulation. This is clear evidence as to how far greater protection has been given to persons depositing money in banks. The pretence is that the banks might go burst but banks do not collapse during a period of this kind of inflation.

The admonitions of the Board of Directors of the Central Bank of Ireland are rather like the reports of the NIEC. The board of directors are quite obviously under the thumb of the Government. They are allowed to make exhortations if they want to but it is rather like the cry of a small bird that has been caught by a large cat. The last bank failure in this country was the failure of the Munster bank in 1870 and in that case all the creditors were paid £ for £. All this talk about protection of depositors is nonsense. What the person who deposits money wants is protection against erosion of the value of the money. However, as happens in human affairs in more countries than in Ireland the job is being tackled in the wrong way.

The Minister referred to licences and he stated that the Central Bank cannot refuse a licence without the consent of the Minister for Finance. I think this is fair enough and I do not quarrel with it—if it were the other way round that they could not give a licence without the consent of the Minister I should have something to say about it. However, there is a sentence on that page of the Minister's brief that deserves severe comment. It is stated:

Every licence holder will have to keep a deposit in the Central Bank equal to 5 per cent of his customers' deposits, subject to a maximum of £500,000 and a minimum of £20,000.

This amuses me because at the moment we have two large banks in this country—the Bank of Ireland Group and the Allied Irish Bank Group. They will be expected to keep a maximum of £500,000 on deposit in the Central Bank. What percentage is this of their deposits—1 per cent or perhaps one-tenth of 1 per cent? I think in each case it would be nearer to the latter figure. Therefore, we have a situation whereby a small bank is expected to keep 5 per cent of its deposits in the Central Bank. It is possible that such a small bank might be making things difficult for the imperial institutions because it is quite easy to carve a chunk out of an empire if one goes the right way about it. However, the situation is that the small bank will have to keep 5 per cent of their deposits in the Central Bank whereas the imperial institutions recently set up will only have to keep about one-tenth of 1 per cent of their deposits in the Central Bank.

The Minister goes on to talk about something that was not in the original version of the Bill which was introduced in 1968, namely, section 23. This section deals with the regulation of ratios between assets and liabilities of holders of licences. The Minister states that the Bill also confers additional power on the Central Bank designed to give more effective control of credit. He also states that under this power the bank will be able to require holders of banking licences to maintain specified ratios between assets and liabilities. On every balance sheet are not the assets exactly equal to the liabilities? As this will come up on Committee Stage I do not wish to delay the House now because we shall have plenty to say about it then. In section 23 there is reference to (a) a specified ratio, (b) a ratio which does not exceed a specified ratio, or (c) a ratio which is not less than a specified ratio, and there is mention of the method by which a requisition may be made, et cetera. This section is quite remarkable and has come in the new version of the Bill; it was not in the version published in 1968.

As we are going to discuss this on Committee, let me give notice to the Minister on one point. Would the Minister mind telling us what ranks as assets in this context? I take it the colossal quantities of Government paper rank as assets because up to recently Government paper was regarded as a most desirable form of asset. If the present Government continue getting the commercial banks to write up £50 million in their books every year, as they did in 1969 and 1970, the commercial banks will not want for assets.

On page seven of the Minister's brief there is the usual absurd reference to the EEC. Nothing can come into the House from this Government without a reference to the EEC. Granted the Minister's brief says: "Should we become a member of the EEC." At least he did not say "When we become a member of the EEC".

A note of caution.

Later on in that page he talks about "the more economic use of banking resources". Since I am getting a reputation for criticising the use of English let me say I think the Minister means the more "economical" use of banking resources. However, it is not a matter of great importance.

The next part of the Bill is in many ways the most important, that is to say, it relates to our currency position. The Minister said: "I am sure Deputies will act with a sense of responsibility in any comments they might make." I have never said that devaluation was inevitable. I have asked many questions of the Minister but I have never suggested that the devaluation of our currency in terms of sterling was inevitable, but I do suggest that, if the Government do not take hold of themselves, if they continue to spend money in the fashion that it is being spent on certain hotels in the west and on certain other matters, it is inevitable. I note the Minister says:

The Government may by order change the par value after consultation with the Central Bank.

I see the most serious objection to this in view of the fact that it is the intention of the Government to put two representatives of the commercial banks on the board. Have we altogether forgotten the lesson which ordinary people learned from the bank rate inquiry in Britain? Let us not mind what the report said; let us read between the lines in relation to that famous inquiry. We all know what the answer is. I do not think, if the situation arises where the Government of this country are considering the par value of the currency, any representatives of the commercial banks should be consulted in any way, and when I come to deal with the directorate I shall have more to say about this. I know of no country where directors of commercial banks are directors of the central bank. There may be such. I do not have that much time to go running here and there to find out what they do in other countries but I do know that the last time I examined the position in the Bank of England there was no director of the commercial banks on the board of directors of the Bank of England.

Let me stay on the parity question for a moment. I have said in this House, and it is worth quoting again and again, that nobody devalues a currency. Currencies devalue themselves. It may be the duty of a particular man, whether it be Mr. Jim Callaghan, Sir Stafford Cripps or who have you, to sign some paper recognising the inevitable. That is all it is. As regards the request of the Minister that we should act with responsibility, is it the responsibility of Deputies to sing dumb? I think Deputies do have a responsibility. It is of much greater importance to the community that the Government of this country should act responsibly than that any comments from Deputies should be responsible. On the one hand the Government treat the Deputies like dirt, and on the other hand they suggest that their comments are of such value that Deputies should act responsibly in the comments they make. I just do not understand that kind of thing at all.

I wish to deal with the directors. The 1968 version of this Bill continued with the three representatives of the commercial banks. Then the amalgamations took place and now we are to have two, the inference being that one is to be a representative of Allied Irish Banks and the other a representative of the Bank of Ireland. What interests me about this is the nature and independence of the directorate. When you look at the present board of directors as individuals it might be that you might not like this person or that person. They are: T.K. Whitaker, Governor; Patrick Burke; D.S.A. Carroll; Juan M. Greene; John Leydon; James J. McElligott; C.H. Murray; and W.J.L. Ryan. You would search around very carefully before you would find a better board than that, on the whole, but I can only take people as they behave. I can only take people on what they do.

For example, we have this unseemly squabble in the west which was shown up so clearly by Mr. Frank Hall on "Newsbeat" the other evening about the effort to get the account of the Western Regional Health Board. First, there was a vote giving it to one group and then there was a vote giving it to the other. This is a form of oligopoly competition. There are stories of widespread social activities in the period between the change of decision. I have not that much connection with the west but even I hear things on the wind. I will not say too much about it lest we might have yet another inquiry. Is leor nod don eolach. In other words, for the benefit of the party opposite, a nod is as good as a wink to a blind horse.

The present Board of Governors includes one man to whose membership of the board I have the most serious objection. This is not a matter of recent opinion. This is a matter that has nothing to do with the man himself. I think it is altogether wrong that the chief official of the Department of Finance should be a member of the Board of the Central Bank of Ireland. I have always held that opinion, and there is no reason why I should change it now. There has been a long tradition in the Department of Agriculture and Fisheries that the Secretary of that Department takes no outside office of any kind. In recent years there has been a similar tradition in the Department of Industry and Commerce, I am glad to say, because at one time there was an extremely bad tradition in that Department, a very bad situation indeed.

I believe that the Minister for Finance is entitled to the undivided advice of his chief official. If the Government want to put a representative of the Department of Finance on the Board of the Central Bank of Ireland, I have no objection to that. He can then go to see the Minister and his chief adviser and make his report about anything that is happening in the Central Bank, and the Minister can have the considered opinion of his chief official.

Perhaps I might be allowed to tell a story out of school. If the Minister would care to go back and look at the appointments to the Board of the Central Bank in 1942 when it was first created he would see a remarkable letter from one of the people appointed. There were a number of errors in that short letter but one of the most interesting was—and he remained on the board for a long time—that he said he was pleased to "except" appointment as a director of the Central Bank of Ireland. I am not all that keen on spelling but it would be worth the Minister's while to go back and look at the letter to see the other matters that were in it as well.

There is another matter in relation to the directors which I should like to mention and that is that there are other groups operating in this country at present, all kinds of other groups— and, in spite of all we hear about the great improvements in management and all the rest, it would be hard to persuade me that a leopard changes its spots—who should be considered for representation if suitable people are available from them. On the whole, it would correspond to what is the case in other countries where persons with knowledge of banking rather than directors of commercial banks are on the boards of their central banks.

The Minister quoted with approval:

The Government does not, however, propose to interfere with the administration of the Bank which will be independent in the carrying out of its functions.

A body can be independent in the carrying out of its functions. A horse that is spancelled is independent in the carrying out of his functions but he cannot move around very much. The Minister also said:

I have already mentioned the general function and duty ascribed to the Central Bank by the 1942 Act which are to take "such steps as the Board may from time to time deem appropriate and advisable towards safeguarding the integrity of the currency and ensuring that, in what pertains to the control of credit, the constant and predominant aim shall be the welfare of the people as a whole".

That is not exactly the same wording as the Minister used at the beginning of his speech where he talked about the welfare of the whole community. That is not exactly the same thing. It is rather like the distinction made by that remarkable politician of the 18th century, Rousseau, between the general will and the will of all. I will not dilate on that distinction though politicians are more aware of it than other people. Even professors of politics do not quite understand what it is but anybody in practical politics understands it.

The Minister said:

The statutory function of the Bank in relation to monetary policy does not, of course, diminish the ultimate responsibility of the Government in that sphere.

Why then have in the Bill a provision that the Government cannot alter the par value of the currency in international terms without consulting the Central Bank of Ireland unless it is the Government have not that much confidence in themselves? To get back to what I started with. The essence of this problem is quite simply this: that the audited Government public expenditure, the audited accounts of the public service, as audited by the Comptroller and Auditor General for the year 1969-70 amounted to £384 million and, in 1970-71, the year just coming to an end, they will be close to £500 million, an increase of nearly 30 per cent in one year, the kind of increase that in a wage or salary causes the Government to be horrified.

The Minister says at page 12:

In our case the relationship between Government and Central Bank rests as much on mutual confidence as on statute. It is sustained by frequent consultations between the Minister for Finance and the Governor of the Central Bank on all aspects of economic policy, by a frank interchange of information and comment in the policy field and by the fact that the Government have an official representative on the board of the bank.

The Government really have not got a representative on the board of the Bank and I do not think it would be desirable nor am I suggesting for one moment that, say, a member of the Fianna Fáil Party should be made a director of the Central Bank. I think the decision which was taken by Fianna Fáil in the early 1940s that Deputies and Senators should not be members of the boards of directors of State or semi-State bodies was a good one. It underlines the point I made earlier of the undesirability of the chief official of the Minister for Finance being a director of the Central Bank.

The Minister promises certain amendments which he does not specify. Perhaps he would indicate what they are about because frankly I do not know what they are about. He said they are partly to deal with the points arising from the Supreme Court judgment in the Marts Act case and partly for technical reasons. Of course if a Bill has been lying around for as long as this one has been, a period of nearly three years, amendments are inevitable. Certainly if it is necessary, arising from the decision of the Supreme Court in the Marts Act case, that the law be amended I do not see any objection to it but I just wonder whether this is not the old game of getting around the decision by enacting legislation ruling out the possibility of the courts giving a similar decision again. If the decision was good law then it should not be ruled out. A Government which does this kind of thing are ill-advised to attempt it in this way. It has been done, of course, time and again but it is undesirable.

These are my main comments on the Bill. It will not bring about a big difference in the situation if the Government continue to use the Central Bank and the commercial banks as a method for wasteful expenditure. It is a pretence that if the Government write out a piece of paper that is an asset. In ordinary bodies the assets are generally something real. There may be bits and pieces of them cash, say, in the bank but in general they are a reality and the liabilities are usually in the form of something that is owed to people or the capital and so on. We are rapidly reaching the stage where the assets, to too a large an extent, consist of Government paper and are therefore purely notes of hand, IOUs. They are not genuine assets and they are not realisable assets in any real sense of that word.

It is fine for the Government to come into this House with a Bill like this which has, of course, considerable merits in it but which if it is not implemented properly will make no real change in the position so far as the finances of this country are concerned. After all, banking is merely one of the methods of carrying on the business of the community and central banks exist in countries for the purpose of seeing that things do not get out of hand. If the Government do not look after their own affairs properly nothing the Central Bank can do will mend the situation.

Notice taken that 20 Members were not present; House counted, and 20 Members being present,

Mr. O'Higgins rose.

On a point of order, some time ago we made an arrangement here that there would be no quorums called during the important meetings which are being held in the House, particularly the meeting of the Committee of Public Accounts. This was an amicable arrangement made between all the parties. It seems the Opposition parties cannot abide by any arrangement.

That is not a point of order.

It shows a cynical disregard for the Committees of the House.

Does this mean that we cannot leave the House?

This is not a point of order.

There are two important committees sitting at the moment, the Public Accounts Committee and the Committee on Procedure and Privileges.

It is not a point of order.

I thought the Government had 74 or 75 Deputies.

We have, yes.

We are not responsible for calling the House.

All this is completely out of order.

It is good that Deputies Crowley and Dowling are joining in the discussions on the Central Bank Bill.

We have not had time.

There is only one member of the Fine Gael Party in the House at the moment.

The first thing I would like to comment on is that we are discussing the Central Bank Bill, 1969 at the beginning of 1971. This particular Bill replaced an earlier Bill, the Central Bank Bill, 1968. No one can argue that the Minister, or the Government, are being precipitate or hasty in relation to the bringing of this legislation before the Dáil. That comment is appropriate in relation to the Government's general concern with the entire banking situation in this country. The Minister in his speech referred to what he called "the bank closure". It is proper at this stage, which is the first opportunity available to us, to make some comment on the bank strike and its effect on people when it was in progress and on its repercussions now that it is over. There can be no doubt but that the closure of the banks from May to the end of November, and their partial closure subsequently, has caused very real suffering and hardship to many people. It is worth remembering that the banks were closed down. Each customer had a contract with his own bank. That contract was not being discharged or being honoured and the banking system utterly failed to fulfil its obligations to the public. In those circumstances if individuals, traders, shopkeepers, business people or publicans had not stepped into the breach the people would have gone without money and would not have been able to buy food. They would not have had money to carry on. In fact, it was the decision of many thousands of traders, shopkeepers and business people to honour cheques which enabled the economy of the country to continue in operation. The least of all possible concern was shown by the Government. Weeks passed, and months passed, and still neither the Minister nor the Government took action to bring the bank strike to an end. We endeavoured to raise the subject here during the discussion on the Finance Bill but the Minister expressed no concern and the impression was created that the Government felt it was rather a good thing to have the bank strike in progress because it was a good cooling off process for the economy. I want that point recalled now when we are discussing the Central Bank Bill. The strike is over—and no thanks to the Minister. The strike has ended without any assistance from the Government. I do not know who won out in the strike; I do not know who gained. I know the banks did not lose.

There are thousands of people today who are counting the cost because they, although not involved, and not having a right to a say in it, have been the people who suffered. And there was of course a settlement and then into many homes and into many small businesses came the result of the settlement with thousands and thousands of dishonoured cheques. This is approaching a national calamity. It merits a few lines at the end of the Minister's statement, a passing reference to the recent closure of the banks. What is going to be done for the small two-man or three-man businesses that are insolvent now, put out of business because they trusted a negotiable instrument and provided either cash or goods in order to keep things going?

I know of no such case.

Well, I can give the Minister some.

I have been asking for them in this House and I have not got them yet. I do not wish to interrupt the Deputy but it is important in the context of what he is saying to make it clear.

A constituent of mine in a small way of business lodged two cheques with Palgrave Murphy's on the 28th of April and continued to trade with that company until the banks reopened. When the banks reopened these two cheques were returned to him dishonoured. There may be thousands of others.

I accept that but it does not quite fit in with what the Deputy is saying.

I do not think I am exaggerating. I would be very glad to give the Minister details of any cases of which I am aware. Thousands of people have suffered as a result of this closure.

Is it not true that hundreds of firms are just holding on in the hope that cheques that they have had returned will be cleared in some way, and if they are not cleared they will go broke?

The point I have been trying to make is that I know of no case in which a firm or an individual has gone out of business solely because of the kind of circumstances described by Deputy O'Higgins, that he accepted a cheque from somebody and found when the strike was over that it was "RD", solely because of that.

I am saying solely because there have been cases of people who have gone out of business where they wrote their own credit. That is a different situation——

(Interruptions.)

I can supply the Minister with a list.

I am not talking about people who became their own bank managers; I am talking about people who in trading and as a result of trading and trading in confidence and so on, find now that they are in very serious difficulties. I believe there are thousands of them.

This is something for which the Government should have concern and for which the Dáil should have concern. Does anyone know the extent of it? The Minister says "Well, I have no details of any individual case" but does the Minister accept that there have been thousands of cheques returned to people in whose favour they were drawn but are now the subject of negotiation, putting it no further than that? Is that accepted?

If it is accepted then we can accept the fact that we have suffered, in economic terms, very nearly a national calamity. If it is as wide and extensive as I believe it to be, then as a result of something which ordinary people could not control and as a result of a happening which may, in fact, have been actually in defiance of their own legal rights under contract, or whatever arrangement they had with their banks, if they are forced to suffer financially there should be some effort made adequately to compensate them. Why not? If there had been a flood disaster or an extensive fire there would be no hesitation on behalf of the community to try to mitigate the losses suffered by people who had nothing to do with the occurrence. There have been serious losses and I do not think the Minister or the Government have a right to shrug it off and say: "Well, what concern is it of ours?" There is a responsibility fully to examine the extent of the losses involved and seriously to search for some means of compensating the people who have suffered through no fault of their own.

This was a bank strike which started in May last. We had a strike four years before and we had one before that again. Are we going to have another one next year or the year after? Nobody can rule it out. No one can say that it will not happen. If it should happen has the Minister any plan? Is there any contingency plan to assist people and to assist the economy if the banks are again closed as a result of a dispute or a disagreement? Because next time the traders, the shopkeepers and the businessmen whatever else they will do there is one thing certain, they will not cash a cheque. If there is another bank strike let us face the fact that we will not succeed in keeping things going by passing bits of paper all around the place. That will not happen. Whatever degree of fault I attribute to the Government and the Minister for their failure to act, for the dilatory way in which they allowed the strike to continue, whatever blame will attach to them if they do not now examine the consequences of that strike, the blame will be all the more serious if in view of what happened there is not now a preparation on some contingency plan for another possible closure of the banks.

So much for the bank strike. In regard to the Bill my party are all in favour of any policy or any measure which is directed towards making our Central Bank a real Central Bank. We are not new converts to this view. We published our views in that respect in the document "Planning Towards a Just Society" in 1965. We set out in considerable detail in that document the developments we felt necessary if a developing Irish economy was to be served by the appropriate banking system. We advocated the exercise by the Central Bank of an adequate and proper control of credit. We pointed out that it was necessary for this purpose that the Central Bank should have power authoritatively to fix appropriate ratios for the commercial banks between their assets and their liabilities. At that time, and it continued afterwards, the doctrine of moral suasion held sway and it was believed by the Fianna Fáil Government and successive Ministers for Finance that the mere action of the Central Bank in persuading the commercial banks to operate a credit policy in accordance with the advice of the Central Bank would always be sufficient. In 1965 we pointed out that it had not proved sufficient up to then and that nowhere else where a central bank had been set up by the community did such exist without exercising direct control in relation to credit. Our point of view was not accepted. Not only was it not accepted but let me remind the House that it was met by one of the most dishonest campaigns ever indulged in by a political party. The Fianna Fáil Party went out, following the publication of "Planning Towards a Just Society" using slogans such as "Do not let them get their hands on your money". "They are out to nationalise the banks"; "They are out to rob you of your savings".

That is because we suggested that the Central Bank should have the legislative power to fix ratios for the commercial banks between their assets and liabilities. We were told it was nationalising the banks and robbing people of their money and now six years later there is introduced this Bill that has been in the womb since 1968. One of the big claims made by the Minister in his introductory statement was that power is now being given to the Central Bank under this Bill to do what we said should have been done as far back as 1965.

Had our point of view been accepted then and had action been taken to have control of credit by the Central Bank, associated with proper economic planning, many of the difficulties of the past six years would not have arisen. We would not have had the wild dissipation of credit or the stop/go credit situation that has been a feature of the last six years. At least there would have been the possibility for an orderly growth of our economy and proper progress towards full employment. However, it was rendered impossible because of the absolutely intolerant attitude of Fianna Fáil and its Ministers in relation to our proposals regarding credit.

Secondly, in our policy document "The Just Society" we advocated another change. We suggested that the foreign assets of the country should be transferred from the commercial banks to the Central Bank. This was a simple proposal but it was greeted with shrieks of horror from the present Tánaiste. He referred to the foreign assets as being "our army of occupation in Britain", the standing army in Britain guarding the resources of the State, and we were told that any attempt to take those assets and give them into the control of the Central Bank would be so revolutionary that it would cause a run on our banking system with a general falling off of confidence in the economy.

All those things were said at that time and now today we have the Minister saying: "Over the years our external reserves have come increasingly under the bank's control." In fact, in the last few years it has been accepted without question that the commercial banks' earnings in foreign assets should be held, controlled and deposited with the Central Bank.

In 1965 we suggested also that the practice of freezing sterling assets in the Central Bank's legal tender note fund and keeping them there so that they were untouched and untouchable was absurd. We said that redemption was such a small element that these vast assets should be transferred and used in the general fund of the bank and become a first line currency reserve. That was a perfectly simple suggestion and was part and parcel of our policy of getting the Central Bank transformed into something which could be dynamic for the economy. Again, this was greeted with derision but it has now been done.

Our other proposal, in which we advocated that the legal tender fund should be supported and backed by an increasing amount of foreign securities, instead of having a sterling base and support, was rejected. Pride is now taken in the fact that these changes have taken place. I do not like to go over past debates and dissensions because the longer one is in politics the more one realises it is wiser to speak as little as possible. If any of us claim never to have been wrong we have ceased to live on earth. However, in relation to banking in particular Fianna Fáil have been so wrong for so long that it is worth recalling that fact in this debate. They have been wrong every time and it was only because of the determination and sincerity of people who believed in "The Just Society", in the principles laid down therein and in the planning that went into it, that gradually the conservative thinking which is inborn in Fianna Fáil has been changed. They were forced eventually to realise that we were right in relation to banking and that if this country was to develop there would have to be a complete change in regard to the Central Bank, its powers and the whole problem of credit. With that background in mind, I can say in relation to this Bill that as a measure directed towards making our Central Bank the real central bank it is a measure that will be accepted and supported by us. It is supported not because we have been converted but because we have seen the conversion. May I refer to some of the details in the Bill itself? Generally speaking, as the Minister has pointed out, the Bill aims at providing, by means of the Central Bank, appropriate supervision of banking development in the country and through the provision of licences pretty well retaining control as to who may not in certain circumstances engage in the business of banking. Then also there are the other powers in relation to credit and so on that I have mentioned.

First of all, with regard to the granting of licences, I hope the Minister will not mind if in relation to the details of the Bill I ask certain questions which in fact might be more appropriately dealt with at Committee Stage, but I want to do it in order to indicate some of the matters which I would subsequently be raising in more detail on Committee. In relation to the granting of some licences the guideline laid down is the aim of achieving the orderly and proper regulation of banking. This is a phrase so general as to be capable of almost any interpretation. I would like to ask what is intended by that phrase. Here the question of competition in the banking system arises. Does the orderly and proper regulation of banking envisage that we will encourage the development of fair competition or that we will restrict competition merely because it is competition, if I can put it that way? On a Bill as important as this there should be some definition of what the guideline would be towards the issuing of licences.

Again in relation to the conditions in relation to licences which I dealt with in section 10 there is the same type of phrase:

...A licence shall be subject to such conditions (if any) as the Bank may impose and specify at the time of the grant thereof, being conditions which in the opinion of the Bank are calculated to promote the orderly and proper regulation of banking.

That is giving too wide a discretion, because the policy in that regard should be laid down by this House. It is handing over outside the control of this House to the bank itself power which can be far too extreme and which in my view goes far beyond the natural and proper object of the bank which should be related to credit policy.

In relation to the revocation of licences in section 11, the various grounds upon which a licence may be revoked are set out, but I notice an omission which I feel should be explained. There may be an explanation for it, but there is no provision for the revocation of a licence on a demand by depositors, and I would propose to deal with that in Committee. In relation also to the deposit of 5 per cent, there is need for greater clarity here. What is meant by deposits? Will they include current account balances? Will foreign currency deposits held by residents of the State be regarded as coming within the term? Or will currency deposits held by non-residents come within it? That section would need some clarification.

There is a provision also in relation to deposits that they should carry interest "at such rate and payable in such manner and at such time as may be determined by the Bank from time to them". Again I would suggest to the Minister that the rate of interest should be specified in the section. It would probably be the market rate of interest but whatever rate of interest it is should be specified in the section itself.

There are other details in the Bill that I would like to raise but many of them can be dealt with on the Committee Stage. I just cannot find the section so I shall have to raise this problem in general without referring to the section—it is this question of clearing house facilities. As I recall the section dealing with that, generally speaking the Central Bank will have power to supervise the cheque clearing process. It may lay down conditions and so on. This brings up the question of non-associated banks, the commercial banks from outside that have been operating here and that up to this have found considerable difficulty in getting clearing facilities.

The Deputy I think is referring to section 26.

I am much obliged to the Minister. I would like to suggest there that any conditions that are laid down should be with this object of ensuring fair and reasonable competition within the bank industry among, of course, licensed banks, and that they should not be weighted in such a way that there is a disadvantage created for one banking group or an advantage for another. Obviously conditions must be laid down but they should be laid down in that way. I will attempt to suggest an appropriate amendment on Committee Stage.

There is one other matter in relation to the non-associated banks. The Minister was cautious in what he said about them, and I can understand the reason for that. They are here and it was fortunate in many respects that they were here when the banks were closed last year. I do not know what their asset holding in the country is. I have a figure—it is probably out of date— of something like £330 million which at that stage would be about one-third of that of the associated banks. If it is of that order it must be appreciated that they are a significant force in the banking industry. I should like to suggest that they should be recognised and that they should be given representation amongst the directors of the Central Bank.

In the section dealing with the bank directors, section 52, the Minister is changing the present position which is that the Minister appoints three bank directors from a panel put forward by the associated banks, and he appoints five other directors. The bank directors are now being reduced from three to two and the others are being increased from five to six. I would suggest that the section should be amended to provide that amongst the bank directors, or the other six if necessary, there will be a director representing the non-associated banks. I know they have not got an association but I am quite certain that is not a problem and that such machinery could be got together easily.

These are some, perhaps, very scattered observations which I wanted to make on this Bill which, may I say, came on the agenda suddenly so far as I was concerned. I arrived back from Brussels at 10.30 last night to be informed that the Central Bank Bill was already under discussion. So, any other contribution I will have to make on the details of the Bill may arise from further study and research.

May I say before Deputy Tully starts that I am sorry if Deputy O'Higgins was inconvenienced but I understand that his party were informed last week of the proposal to take the Bill.

So I gather. I appreciate that. It was a failure in communications all round.

I listened with great interest to the contributions made by Deputy O'Donovan and Deputy O'Higgins. I always like to hear experts talking about subjects they understand fully. Let me say immediately that I am not an expert on this matter and, therefore, my comments will be those of a layman. Perhaps Deputy O'Donovan had an extra advantage because of the fact that he was an official of the Department of Finance and also a Parliamentary Secretary for a period. Therefore, he knows a lot about the ins and outs of it.

As I said, I listened with interest to what they both had to say. I agreed with all of what Deputy O'Donovan said and I agreed with most of what Deputy O'Higgins said. Deputy O'Higgins referred to the fact that the policy which Fine Gael introduced some years ago was attacked by Fianna Fáil during the following election campaign—I remember it well. The same thing happened to the Labour Party during the last election. We introduced this outline policy document and this was used very much by Fianna Fáil during the election. In fact, some of them do not know anything at all about policy because they are in the happy position of being in Fianna Fáil and having no written policy and, therefore, they can change around whatever way it suits them. They got a version of it, I assume from the top, which suggested that everybody on a Labour Party platform definitely had a tail, and possibly had horns too.

This applied particularly to the question of banking and credit and financial policy. It was suggested, as it had been suggested previously about Fine Gael, that if the Labour Party had any say in the running of the country we would most certainly try to grab the money in the banks. When we see what subsequently happened, and see those who are now helping those who were anxious to grab the money out of the banks and were very successful at it, it seems to be a judgment from above.

One thing that comes pretty loud and clear through all this is that no matter what the Fianna Fáil policy on banking and finance was up to this they now appear to be seeing the error of their ways. While it may have been all right to suggest that certain things were wrong at election time, they now appear to be doing them and recognising that they are the right things to do. I do not care who suggested these things. If something is right, and if somebody learns by mistakes I will give him full credit. While I do not go the whole way with the Minister's Bill, I think that what he has introduced here in the past few days is generally welcomed by the House and could have been introduced by a Fianna Fáil Fine Gael or Labour Minister for Finance.

Hear, hear.

It is only fair to say that. I give full credit to the Minister for the effort he is making. However, there are a number of things in the Bill with which I do not agree and this is one place where I differ from Deputy O'Higgins. Deputy O'Higgins has suggested that three directors from the commercial banks should be retained and that he would add in one from the non-associated banks. I would not have a director from the commercial banks at all. The commercial bank directors on the Central Bank are there for one reason only and that is to protect the interests of those they represent. I do not think that is what the Central Bank is for. I do not think there should be any director from the commercial banks on the board of the Central Bank.

That does not mean that I disagree with the idea that recognition should be given to the non-associated banks. Later I propose to give a very good reason why I think that. The non-associated banks, or the foreign banks as some people like to refer to them, did a good job at a particular time and possibly they can do a lot for banking in this country if they are given the opportunity to do so.

While I do not agree 100 per cent with some of the pronouncements made by the Central Bank, at least we have come a long way from the day when the contribution made by the Central Bank in regard to remedying the ills of the economy was a statement to the effect that a pool of unemployment was a good thing. Now at least no board of directors of the Central Bank will attempt to tell us we are better off if there are people on the labour exchanges because if enough people are on the labour exchanges waiting to get jobs those who are working will be a little bit chary about looking for more money for what they are doing. This has been successfully dealt with by the trade union movement and I would say that we will not again see written in any report of the Central Bank a suggestion that a pool of unemployment is very necessary for the good of the country. It is a good thing that that day has gone.

Reference has been made to whether or not the pound would or could be devalued. The only person in either the Dáil or Seanad who has been consistently preaching the devaluation of the Irish pound is a member of the Minister's own party. Every time one speaks to him one is told it will take place next week. He succesfully forecast that the British pound would be devalued about a year before it happened and that has gone to his head because he is always telling everybody that the Irish pound is sure to go, on its own this time, not with the British pound.

I do not know who that person is but I do know there have been public statements from Deputies from the other side of the House to this effect.

Debate adjourned.