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Dáil Éireann debate -
Tuesday, 21 Nov 1978

Vol. 309 No. 8

Exchange Control (Continuance and Amendment) Bill, 1978: Committee and Final Stages.

Sections 1 to 3, inclusive, agreed to.
SECTION 4.
Question proposed: "That section 4 stand part of the Bill."

Under this Bill scheduled territories are now redefined. Until this Bill is enacted the scheduled territories would have been all the territories except the United Kingdom and Gibraltar and some other territories. We were seeking to ascertain from the Minister of State on the last day what would happen in the event of a decision being taken by the United Kingdom to remain outside the EMS on 4 December while Ireland decided to go in. What would be the position then in regard to flows of money, particularly sterling notes, between then and any future date one could mention? Have the Government contingency plans to deal with that situation?

In substance my query is much the same. This is in fact the point we had reached on the last day on Second Stage and we had asked the Minister whether he could inform the House of the fate that would await the British notes in circulation here in the event of Britain's not joining the EMS after 1 January. There has been a very close currency relationship between Britain and Ireland existing over many years.

When this Bill was discussed before in the House it was a purely enabling measure. On this occasion there is the prospect of its powers being invoked. In those circumstances we do not think it presumptuous on our part to ask the Minister to give us an assessment of the practical implications of a change in the parity relationship between our currency and the British since it is a very likely event in the near future. We agreed on the last day to break off until the Minister had considered this question. I invite him now to give us some answer to that rather fundamental question which is at the heart of this Bill.

This matter was raised last week and I referred to it in my speech. The explanatory memorandum covers the question now raised. However, in order to be as helpful as possible to the Deputies on this matter I will make a comment on the matters raised. It would be useful in dealing with sections 4 and 5 of the Bill to refer again briefly to what exchange control is about. The purpose of exchange control is essentially to protect the exchange rate of the currency and the official external reserves. I believe the Deputies are fully aware of this.

Controls are directed at capital transactions. Current transactions, such as trade, travel and general current transfers are not restricted but they are supervised to ensure that they are not used to move capital in an unauthorised way. Sections 4 and 5 of the Bill deal with the importation and exportation of currency notes and can be taken as complimenting the powers contained in the Exchange Control Act, 1954, generally, the powers which the Minister would be enabled to use under section 3. It is inherent in any system of capital controls that the power at least should be available to regulate the use of currency notes for international transactions hence, sections 4 and 5 of the Bill.

It would not follow that the importation and exportation of notes would be prohibited. I believe Deputy Barry was interested in that point last week. The exact measure that may be required would have to be settled in the light of developments which I cannot forecast at the moment. Similarly, bank notes of Irish residents abroad and of non-residents in Irish banks would have to be controlled but it does not follow that the holding of such accounts in a post-break situation would be prohibited. The introduction of exchange control on UK transactions would not mean that sterling notes would be inconvertible here or that Irish notes would be inconvertible in the UK. They might still be circulated to some extent in the respective areas. Of course, given the exchange rate for the two currencies might well be varying in that situation, the degree to which they would circulate would almost certainly decline. However, this result would not arise directly from the imposition of exchange controls.

It is fair to say that many of the issues raised especially by Deputy Barry and Deputy O'Leary relate to exchange rates questions and EMS and not directly to exchange control. I want to make this point very clear because we cannot go into the matter of the EMS. This Bill is an exchange control Bill. However, I will try to give some indication of the factors relevant to the particular issues raised. That is as far as I can go at this stage. I am sure the Deputies will appreciate that I cannot go into the area of the EMS. The Bill is more or less preparing for all eventualities.

Have any discussions taken place with financial interests on the situation in the post-break-with-parity situation with sterling.

I can assure Deputy O'Leary and Deputy Barry that every possible avenue is being explored in the event of this happening.

I am not disputing the fact that you will rule against this and obviously the Minister of State feels that it is inappropriate to go into the EMS at this stage and I accept that.

I am sure the Deputy remembers that the Ceann Comhairle's rulings cover this Bill. I will allow relevant questions on the Exchange Control Bill but we will not have a debate on the pros and cons, the wisdom and all the rest of the EMS. Deputy Barry on this section.

I intended to say that the Chair ruled that a debate on the EMS could not take place. The points we are trying to raise do not relate to the EMS but to very practical problems that will arise if, as a result of our joining the EMS and Britain do not join, sections of his Bill have to be implemented. Those are the points we have been raising. I raised a point which the Minister of State has not answered, I understand at the moment that there is an effective exchange control in operation without this Bill because the Central Bank, as I pointed out the last day, are not allowing the forward buying of sterling to business people here whose normal way of trading is to get goods on credit and pay for them in three, six or nine months' time, or whatever period they have agreed to. When dealing outside sterling areas in Beigian francs or German marks that would necessitate getting a rate today which would be applicable next May, June or whenever it might be to the particular trader concerned so that he knows his competitive position today because he will pay next May or June at the rate agreed today. unfortunately, this is not happening now with sterling. Even though the 99 per cent certainty is that they will be on a one-for-one basis in the New Year this is causing some disruption in trade at the moment because the traders find it impossible to buy forward sterling. They can buy forward in other currencies but not sterling.

I am trying to be as helpful as possible on this matter. As I indicated the Central Bank are fully aware of the situation and have already issued a statement on that matter.

To the public.

I did not see it and none of the business people I have spoken to have seen it.

What is this?

The Central Bank have issued a statement on the forward buying of sterling after 1 January.

As I have indicated the Central Bank are fully aware of the situation and have already issued a statement on the matter. I want to assure the Deputy that the matter is being kept under review in the bank and in the Department of Finance and that whatever action may be required will be taken. I can assure the Deputies of that.

Is the Minister of State saying that there has been a full discussion with all the financial interests up to this point?

That answers for itself.

Has the Minister a copy of the Central Bank statement with him and could he give us the gist of it?

If I am to issue a statement on a statement which was published we will go into the whole field of the EMS. I am not prepared to do that at this stage.

The point I was making is that there is an effective exchange control in operation at the moment. The Minister says that this has been clarified by a statement from the Central Bank. If the Minister can give me the gist of the statement to assure me that that is so I will drop the point.

For the benefit of Deputy Barry and Deputy O'Leary the statement was issued on 27 October 1978 and I am sure the Deputies could consult the statement.

I am looking for an assurance that Irish traders can conduct the business they engage in now into the new year. The Minister says they can do this because a statement has been issued by the Central Bank covering this point. I am sure that is correct but if I could know from the Minister what is in the statement so that I can be assured that the point is covered I will drop the point. That is all I am looking for.

I said that I can assure the Deputy that the matter is kept under review by the bank and the Department concerned.

Has the Minister got a copy of the statement? I am not trying to attack anybody or not being smart about this. If the Minister has not got a copy of the statement that is fine but if he has it and I could see it so that I could be assured before the Report Stage that it covers the point then I am satisfied. That is all I am looking for.

If the Deputy wishes, I shall make available a copy of the Central Bank report.

Question put and agreed to.
Sections 5 to 7, inclusive, agreed to.
Title agreed to.
Bill reported without amendment and passed.
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