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.