I move: "That the Bill be now read a Second Time."
The only purpose of the Bill is to continue in operation the Exchange Control Act, 1954, for a further period of four years. That Act is due to expire on 31st December, 1974.
Historically exchange control originated in the emergency conditions of 1939 when it became necessary for us, in common with other sterling area countries, to help safeguard the foreign exchange reserves of the area to which we had access for our requirements of foreign currencies. Exchange control was first operated under emergency legislation. This was replaced in 1954 by the present Exchange Control Act. The Act was expressed to expire four years later. However it has not proved possible to dispense completely with exchange control and the operation of the Act has therefore been extended at four year intervals ever since.
The 1954 Act gives power to control:—
payments to and on behalf of persons resident outside the scheduled territories—at present, the State, Northern Ireland, Great Britain, the Channel Islands, the Isle of Man and Gibraltar;
dealings in gold and foreign exchange;
dealings in and the export of foreign currency securities and unregistered sterling securities;
dealings in sterling securities on behalf of persons resident outside the scheduled territories;
the export of currency notes and the manner of payment for goods exported outside the scheduled territories.
The Act 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 depositary, 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 foreign exchange is readily available to Irish residents for all bona fide current payments in accordance with our obligations to the IMF. Such supervision as is applied is designed to ensure that current transactions are not used as a cover for unauthorised capital movements.
Control of capital transfers continues to be necessary. Persons wishing to make direct or portfolio investments outside the scheduled territories 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 usually stands at a substantial premium over the official exchange rate or it may be financed by foreign borrowing. Sales of foreign currency securities are subject to certain conditions on the disposal of the proceeds of the sale.
The day-to-day administration of exchange control is in the hands of the Central Bank of Ireland, to which it was delegated in 1965.
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.
So far two directives have been adopted by the Community requiring the liberalisation of particular categories of capital movements.
The principal transactions involved are direct investment in business undertakings and the purchase of publicly quoted securities. During the negotiations for accession to the Community, we sought and obtained arrangements under which the removal of restrictions on these transactions would be implemented gradually over a transitional period. A substantial relaxation on direct investment was however implemented on entry, under which official exchange is allowed up to a limit of £250,000 per project per year for all new approved direct investments by Irish residents in EEC countries other than the UK. Applications to transfer larger amounts at the official rate of exchange are considered on their merits. Relaxations were also made in relation to capital transfers by Irish residents taking up employment in other EEC countries.
The existing exchange control legislation is adequate to enable us to meet our EEC obligations as they now stand. This can be done by making suitable amending regulations and giving necessary permissions.
It is not easy to foresee what developments may occur in coming years in relation to foreign exchange transactions. There is no immediate prospect however that sterling will become freely convertible on capital account. It is necessary therefore to retain the 1954 Exchange Control Act in operation. I ask the House to agree to its extension for a further period of four years and I recommend the Bill for approval on this basis.
