Vol. 260 No. 11
asked the Minister for Finance if the approval of his Department was necessary or was sought by the ESB in connection with the recent £10 million term loan which they negotiated with British based financial institutions; why £1 million only was raised from an Irish financial institution; and if he will indicate his Department's policy towards cross-channel and/or foreign borrowing.
13.
asked the Minister for Finance whether any approach was made by the ESB to Irish financial institutions to borrow the full amount of £10 million which was borrowed from cross-channel sources.
With your permission, a Cheann Comhairle, I will take Questions Nos. 12 and 13 together.
In order to continue its development programme in the current year the ESB needed to borrow some £10 million for a ten-year period at least. The ESB has continual contacts with the Irish banking system and having discussed the matter with various banks accepted an offer from an Irish bank, the Northern Bank Finance Corporation, to raise the £10 million. A sum of £4 million was raised from Irish sources and £6 million from cross-channel sources. The proposed agreement was made known to the Central Bank who will take it into account in setting out credit guide lines.
My approval to this borrowing was necessary and, in fact, I have given my guarantee to the payment of the interest and to the repayment of the loan. I am satisfied that the terms are favourable.
I have indicated my policy towards foreign borrowing in two recent questions by the Deputy. It is that following discussions with the Central Bank and the banking system it will be decided what amount should be borrowed externally and what amount will be invested by the Irish banking system in the public capital programme, these amounts to be consistent with the aim that the supply of money and credit to the private sector will be such as to give maximum support to output and employment.
Would the Minister not agree that, where possible, the money should be borrowed here at home?
Yes, preferably.
Would the Minister say if the £6 million could not have been borrowed at home without jeopardising the private borrowing sector of our economy?
The particular terms involved for this loan meant that some of the Irish banks were not terribly keen on it because of the term required. Furthermore, we know from the figures available that the foreign borrowing that will be necessary will certainly exceed the amount here and the recent loan in Germany, so that it does not interfere with the total amount that we will have to borrow.
The concern is to ensure that there will be sufficient credit available for the private sector. This money would have been over and above the amount to be invested by the banking system in the public capital programme. Therefore, it will not affect the amount available for the private sector.
Would the Minister state that he could not have got this £6 million from the Irish banks?
No, that would be going too far.
I mean, he could not have got it having regard to the demands made by the private sector. I know the Minister could get it, but is he convinced that it could not have been got having regard to demands made by the private sector on the lending facilities and abilities of the Irish banks?
In so far as this matter can be calculated at the moment, the position is that the amount that will have to be borrowed from external sources will certainly exceed this amount plus the other loan recently negotiated. In that sense, it does not matter very much whether this particular loan or another one comes from abroad as far as the overall economic effect is concerned.
How is it decided each year? How much has to be borrowed from abroad?
Very roughly by calculating the total amount that will be needed, the total amount available within the Irish banking system having regard to the requirements of the private sector, and the amount available from Exchequer sources as well.
Could the Minister say how he reconciles the statement he has made with the fact that in the past year the private sector have reduced their borrowing from the Associated Banks and the Government have taken up the slack and that has still left the banks in a more liquid position than was expected. I find it hard to see how that position, which is adverted to in the Central Bank bulletin, can be reconciled with what the Minister has just said.
It is not quite correct to suggest that the private sector's borrowing was down by the amount——
£23 million.
As I pointed out in the budget statement, this gap was made up through some of the foreign banks operations here with the money concerned, in the main, going into the private sector. I do not follow what Deputy FitzGerald has in mind when he says we cannot reconcile the two statements.
My point is that the Central Bank report and other statements, including the Minister's, have made it clear that the Associated Banks faced a situation during the past year in which the demands for private credit actually fell instead of increasing and the slack was taken up, in part, by the Government borrowing additionally. Nevertheless, the amount of credit extended by the Associated Banks was still less than the Central Bank had intended or thought desirable. It said so plainly in its bulletin. In the circumstances the rationale of borrowing abroad rather than from the Associated Banks is a bit obscure, and the reference to the non-Associated Banks seems to me to be largely irrelevant.
I do not think it is irrelevant.
Largely irrelevant.
Of course the Deputy will appreciate that he is talking about what happened last year. In this question we are talking about what will happen in the coming year.
Can the Minister say if he could have obtained the money in the same way as a previous Government did by selling the transatlantic aircraft and putting people out of employment, and then transferring it to the ESB.
That was advocated recently by a Fine Gael Deputy.
What was the date?
It was quite recently. The Deputy was referring to——
The credit year ended in mid-April.
—— the amount of money taken up by the private sector from the Irish banking system last year. In talking about the borrowing programme for the coming year and the relationship of this money to that, we are talking about the coming year.
We cannot chop down the years like that.
Question No. 14.
I am talking about the credit year ended in mid-April.
I think the Deputy is missing the point.
Can the Minister tell us the interest rate?
1½ per cent above interbank rate.
What is interbank rate?
I cannot say at the moment. It varies from time to time. I could not say offhand.
