TRADE LOANS (GUARANTEE) BILL, 1924. SECOND STAGE.

Question proposed—"That the Bill be read a second time."

I am very sorry to rise again, but I was hoping that somebody else might speak on this matter. I should like to ask one or two things about this Bill. The first point is why the banks cannot do this business. I suppose there must be certain risks involved that the banks do not care to take, and the Minister must stand behind the banks. We have got a distinguished banker here and he may be able to enlighten us on this question. If money is wanted for business purposes, and presumably the Minister is not going to guarantee anything unless it can show a good prospect of succeeding, why cannot the banks give this money? There is a lot of money locked up in investments in the banks, and I am sure the banks, from the little I know of them, are only too anxious to lend. They live on lending, and in fact if they did not lend they could not live. It puzzles me that the banks cannot underwrite this or what class of risks the Government underwrite that the banks would not. Then again I would like to know what form of security the Government are going to take. Presumably they are going to take a security that would not be entirely satisfactory to the banks. Otherwise why do they come into it at all?

Then, with regard to Section 1, a rather curious form of wording occurs. "This guarantee is to apply in connection with the carrying out of any capital undertaking or in connection with the purchase of articles manufactured or produced in the Saorstát and required for the purpose of such undertaking." So that the alternative would appear not to be an alternative at all, for really if the capital is to be applied in carrying out an undertaking, presumably that comprises the articles required for the undertaking. I am not quite clear that that word "or" really suggests a distinct alternative. The second condition is comprised within the first, so far as I can see. Or is it intended that all the articles used in this manufacture must be of Irish manufacture? Of course, that is absolutely impossible. For any form of creamery enterprise, for example, the machinery is not made in this country and you could not expect to get it. You may buy it from someone who has an establishment in the country, but he is only a factor, and the machinery has been imported from outside the country. I do not know what the Government has in mind by that somewhat ambiguous alternative. There is one other point. I notice that the expression "working capital," perhaps wisely, is not defined. It says that no loan is to be guaranteed for the purpose of working capital, and when I look at the definition clause, being interested in this particular question, to see how working capital is defined, I find it is omitted. I suppose it rests with the Minister in his wisdom to decide what working capital is, and I think he will find it a pretty elastic term.

In reply to Senator Sir John Keane as to why these enterprises are not financed by banks, anyone with an elementary knowledge of banking can answer that question. Banks are not in existence for the purpose of lending money for long periods for enterprises of this description. If a railway has to be built or a canal to be made, or a waterworks to be made, or other works of that description, the money is not provided for them by banks. It is provided by the public, and unless the enterprise itself has something inherent in it, that will attract public money to it, then this system which was introduced not so very long ago in England in the Trades Facilities Act comes in to give such enterprise that security which will encourage and enable people to come in with their money. But as all these loans are for long periods for 20 or 30 years, as Sir John Keane knows, it is not the function of banks to lend money for such periods. Banks lend on security for comparatively short periods, and they do not finance capital expenditure of that description. There is one thing I would like to put to the Minister, and it is this, the total amount mentioned in the Bill to be provided is £750,000. That, I may take it, is a mere drop in the ocean if anything is to be done. In England something like £110,000,000 has been issued. I presume the amount mentioned in this Bill is a first step and that the Government are quite prepared if suitable enterprises come forward to enlarge these figures and powers.

AN CATHAOIRLEACH

You will observe, Senator Guinness, that under Clause 1, no guarantee is given after the expiration of the year. I think that would explain the amount of the limit in the Bill.

I take it from that that at the expiration of the year the guarantee for £750,000 would lapse. If it lapses at the end of the year it would be perfectly useless from the borrowing point of view. In another section of the Bill it would appear that the Government is actually coming into competition with banks and other lending bodies where they are actually providing the money themselves. That is a totally different proposition and it is, I think, somewhat questionable whether it would be an advisable thing for any Government to come forward and advance public money for what is nothing else than competition in trade.

I would like to support this Trades Loans Guarantee Bill because I think the Ministry has taken an extremely wise step in introducing this Bill. I agree with Senator Guinness that as regards the amount mentioned it is only a drop in the bucket, but it is better to have that drop than nothing at all. Prior to the introduction of this Bill, I think I am correct in stating that both in Northern Ireland and in Great Britain an Act of a similar character was in operation, and that industries there could be assisted in the manner proposed in this Bill while in the Free State no such facilities could be given. If such assistance was necessary in England it is doubly and trebly necessary, particularly under present conditions, in the Free State. I was rather interested to hear from Sir John Keane that banks live by lending, because if he would undertake to start a bank I should be glad to borrow from it. My point really is that banks cannot go on lending unless at the same time there is sufficient money put into these banks to enable them to function. There seems to be an idea that banks could keep on providing money in the country if their deposits were to be reduced. I agree with Senator Guinness, and it is really obvious that banks cannot exist by lending money for long periods and that if, as I am afraid is frequently the case, small industries are started on the strength more or less of securing loans from banks, expiring at the end of four or five years, and they find at the end of that period that they cannot pay, the result is that the banks have to take legal steps to enforce their proper rights for the repayment of the loans and you have failure in business. I do not think you could possibly build up industries in the Free State on that basis, and if this Bill does anything to enable money to be made available for industry over a long period it will have achieved a great deal.

There is one point I would like the Minister to deal with, and it is this. £750,000 is admittedly a small sum. It seems to me, under this Bill, no distinction is made as to whether the State guarantees the capital or only the interest. If the whole of that £750,000 is to be a guarantee as capital, I admit you could not possibly go any further, but if you are only guaranteeing the interest on even half that sum you could go to a much larger sum. I would like to see the Act amended, if the Government only guarantees the interest to be paid on the capital, so as to enable them to give a larger sum than £750,000, because the State is only subject itself to a comparatively small liability if it only guarantees the interest. There will be cases where the whole capital will have to be guaranteed, but there will be many other cases where only the interest will be guaranteed and where the public put up the money, and if so, I would like to see the Advisory Committee placed in a better position than it is under this Bill.

I would like to ask the Minister would it be possible for the Ministry to issue Treasury notes for the purpose of financing this Bill.

In reply to the remarks of Senators Guinness and Douglas, I agree that for fixed capital expenditure banks cannot be expected to finance it. Already, rightly or wrongly, banks finance a large amount of retail distributive business. A large number of the co-operative societies are financed by banks. As to the reduction of retail prices, even the title of the Bill shows that it is not by any means to be a long term measure. I hope Senator Douglas did not think my suggestion was that banks live solely by lending. Lending is an advantage, just as you live by eating, drinking and sleeping. I say that lending is a direct advantage to the banks themselves.

The answer to Senator Sir John Keane is that the banks lend working capital and the public provide the general ordinary expenditure. I think the intention of the Bill is to enable industries to be started that will have their working capital subscribed by the public and guaranteed by the Government.

Senator Sir John Keane opened his remarks with a question, why the banks cannot lend this money. I think that rather implies something amounting to slander on people's respectability, or something in that way. If he had out it, why the banks will not lend, he would be simply echoing a groan that I emitted for the last few months when schemes came before me, and when I referred the people who presented them to me—essentially sound schemes—to the banks. I asked them why they could not go to the banks. I rather think that the effect of the Trades Facilities Act in England and in Northern Ireland, and pretty well in every country, where the problem of unemployment has to be faced, seems to me to imply a certain criticism of banking institutions all over the world; that they cannot adapt themselves to the circumstances of the present day. The fact of the matter is, whether that criticism be applied rightly or not, that every government in the world is faced at this time with the question of unemployment, and the main plank of every party in every state has been to rely upon something in the nature of a Trade Loans (Guarantee) Act and a Trades Facilities Act.

This Bill of ours is not by any means new. With one exception—Section 2 —it is pretty well a copy of the British Act. Section 2 is, I think, totally new, and is certainly not in any Trades Facilities Act so far. It is the answer, in so far as the Government have been able to find an answer, to the repeated claims that have been brought forward for an anti-profiteering Bill. The question was considered, and it was discovered that the control set up during the war had only led to the establishment of rings which cut out competition. Apparently the only way to break rings is to increase competition. This Bill aims at that. It is an experiment that we are going to watch with close attention. Although a certain small sum is set down for the purpose of Section 2, I may mention that the Minister for Finance has been so far prevailed upon as to give me an assurance that if the working of that section is successful, other moneys will be advanced under it. It has been pretty well decided that of the different projects brought forward to revive and create industry in this country, these Trade Facilities, or Trade Loans (Guaranteed) Acts are a better remedy and a better answer to the problem of unemployment than fiscal adjustments.

Senator Sir John Keane raised a few technical points which I may as well advert to. He said that the Ministry was not going to guarantee unless the project showed good hopes of success. The Ministry is carefully protected in this Bill from guaranteeing until an Advisory Committee has considered the project and passed it. I may say—and this is a point that was raised in the Dáil that I can make clear here—that the recommendation of the Advisory Committee is not going to be accepted automatically. It is purely an Advisory Committee. It has been thought advisable in all countries, and here, to remove the supervising machinery under the Bill outside the Department. We thought it better to get an Advisory Committee of a certain expert type of people, and when they come along to the Department, their recommendation will naturally fortify a good claim. I am sure Senator Sir John Keane was not intentionally misleading, but his remark might have a wrong effect. Of course, the Ministers will be the final persons in deciding if the scheme is passed. If it has run the gauntlet of severe criticism, and if it has successfully emerged from the Advisory Committee, it will come along to the two Ministers concerned.

As to the alternative in Section 1, I agree with the Senator that it does not seem to be much of an alternative, and that it is something pretty well comprised in the first one. I think I may stress the intention. The intention was to single out the question of Irish manufacture, but not bank on it completely. As the Senator has pointed out, there are many industries where it will be impossible to get things, such as machinery, in Ireland. It has been considered wise to stress that point. Where no alternative scheme comes up, which would have the effect of involving a larger sum than is allowed, then such a scheme will take precedence, whether or not the material is going to be manufactured in the country. It stresses one point and that is not meant as a definitely complete alternative to the phrase quoted by Senator Sir John Keane. Now the other point raised by him is, of course, the most delicate matter in the whole Bill. I would avoid the responsibility, as I have avoided it, of defining "working capital." I do not think in a House of business men I should be asked to define anything so elusive as working capital. I think what might be considered capital expenditure in one scheme, might be accounted working capital in another. I hope to leave it to the Advisory Committee to define this. I hope to be able to pick out an expert body for that purpose. I prefer to leave it to the Committee as to whether or not the expenditure concerned is to be considered capital expenditure or working capital.

Now, Senator Guinness raised a point as to the amounts to be made available under the Bill. Clause 1 provides for £750,000, and Clause 2 for £250,000 of which no more than £50,000 is to be paid out in actual loans. That, as I have already stated, is definitely recognised as being a beginning and nothing more. The Minister for Finance has guaranteed that if these schemes go well there will be no restriction in the way of money. There will be necessary restrictions in the way of how far we can get to guard ourselves, but within that limit there will be no undue holding up of schemes. I am specially concerned with clause 2. I look upon it as of a snowball character. If one or two good schemes are to be started for the purpose of reducing the cost of commodities I believe it will have a big cumulative effect, and that the cost of living will be brought down with a run. A considerable amount of our trouble would then be passed. The Trades Facilities Act in England, Senator Guinness has told us, has through its operations expended £110,000,000 so far. I accept that statement from him. One of the first acts of the Labour Government was to announce an extension of from 60 to 65 millions and in Northern Ireland whatever has been required under the same Act has been granted.

I hope you will follow suit.

It will depend upon the success of the schemes coming before the Advisory Committee and entertained under the provisions of this Bill. A suggestion was made by Senator Douglas that an amendment might be accepted to allow the earmarking of a certain amount of money for guarantee, and a certain amount in the other way. I would prefer not to have that and I hope the Senator would not consider it necessary in the light of what I have said that this is to be an experiment. If it is to be successful, there is going to be no further holding up of money. Let the Bill develop as schemes come in. It depends on what particular type of schemes comes along, whether they are the actual loans or the guaranteeing of interest. I am afraid I cannot give a satisfactory answer to Senator Irwin with regard to financing this by the issue of Treasury notes. I am afraid that if we were to delay the scheme until the experts in the matter decided questions of currency or the issue of Treasury notes, the earth's face would almost have crumbled before we could have any advance. I believe very much in this Bill, and I am very pleased to find that the Seanad has so far approved of the measure because we are in a difficult position in this country. I have alluded to this before but I think it is necessary to stress the point.

We are not exactly in the position in which other countries found themselves after the war when certain industries were destroyed owing to the destruction of wealth. We are in that position, and, in addition, if we had all the industries that were ever in this country going at full blast, there would still be unemployment. We have to create new industries, and we must get the investing public here, and we must get the creators and directors of business enterprise. There is much more than the lending and guaranteeing of money in this. The pyschological effect is this: If a scheme is put up and passes this expert committee, and in addition is given security under the Bill, then it is a sign that it is a good scheme and the public will have confidence if it passes the barrier of criticism. Secondly, the scheme will have a reasonable chance of succeeding, because the Government would like it to succeed. There is that at the back of the scheme as well as the material assistance which we hope to render under the Bill. This psychological effect will help the scheme as much as the material assistance.

I was very pleased to hear the speech of the Minister in connection with this Bill. I also think the Bill will, in addition to its material aid, have a psychological effect, and I speak as one who is interested in the Irish Industrial Development Association. I would like to ask the Minister one question in connection with clause 1 of the Bill. In a case where the scheme has gone through the various courses of criticism and test, which it is proposed each scheme should pass through, then until the project is approved and the machinery put before us for supporting any particular enterprise, is there any proposal or amendment for auditing and safeguarding of the capital as if it were a public company? Is there anything done by way of the appointment of an auditor or the publication of certain returns as is the case in all public companies? The Bill says "the Minister for Industry and Commerce may guarantee...as he shall think fit" and so on. I think that is rather loose and not sufficiently specific, because sometimes I have got money easily from banks or other people, and I think when money comes easily it is not so closely safeguarded as if you had to pay 5 per cent. to the shareholders and others at the end of the year.

The Minister in his opening remarks rather criticised the action of the bankers in this country. He stated that he had been snowed under by applications for credit from enterprises which in his opinion were good, and that he referred them to the banks and that the banks had not been open to receive them. Well, he then went on to explain that under this Bill when these enterprises, for which facilities and guarantees are going to be given, come along, that before the grant is made or a guarantee given, the proposition has to be examined carefully by an expert Advisory Committee and get their approval. It has then to get the approval of the Minister for Industry and Commerce and the Minister for Finance. That is to say, it has to run the gauntlet of at least three very important bodies or individuals. Now, if we go back to the banks, and a proposition of a somewhat similar kind comes before the banks, we are not supplied with Ministers and Advisory Committees. We have certain individuals known as directors and they have to examine the scheme as best they can. I do not think it is exactly fair to the banks to criticise them more or less in the way the Minister has done. The directors of the banks are responsible for the money of the depositors. That money has been handed to them and they are responsible for it. The directors themselves might be brought into court and prosecuted for malappropriation or negligence in the use of that money. The Minister, on the other hand, is not using the money of depositors. He is using the public money and there is very little responsibility attached to him in using that money. He and the Government may be put out of office, but it is a very unusual thing and a far-fetched idea that they would be. In one case he criticises adversely the banks for not doing what they ought to do, and at the same time he surrounds himself with expert critics in connection with a matter for which there is not very great responsibility on himself.

Senator Dowdall has put to me two very pertinent questions. I might answer them both together. As my mind runs at the moment with regard to the Advisory Committee, I had intended to have one Committee for the purpose of Clause I strengthened for the purposes of Clause 2, by the addition of someone connected with agriculture, or having experience in agricultural matters. It has been put to me that I should have two separate Committees and have two bodies, one for Clause 1 and another for Clause 2. If I can get six men of the expert type I require with sufficient spirit to take on both, I will have two Committees, but so far I have found it difficult to get three men. If I have three it will be needful to have an expert accountant as one of those three. I think what the Senator requires would be looked into. I was going to put in a clause to read "on such terms and conditions as the Minister may think fit." Those terms would include audit of accounts and supervision of the expenditure of the money. With regard to what Senator Guinness said——

AN CATHAOIRLEACH

I hope you are not going to attack the banks again.

I do not remember having used any phrase about attacking banks.

AN CATHAOIRLEACH

He suggests you did, and if you do he will want to reply.

I had no intention of attacking the banks. What I did say was that I have received a considerable number of applications since I came into office, and my thoughts were, "Why could not the banks give this?" The Senator inferred a different thing from that. That is what I meant. I was looking at the banking conditions, and I realised that certain schemes put before me were outside the purview of ordinary banking. I did not intend to criticise the banks. I did say that great facilities were regarded as necessary. I did not mean to imply any criticism of banks as at present constituted, but merely said that banks did not adjust themselves to the new conditions. I quite agree that banks have such a responsibility for the handling of depositors' money that they cannot move outside a certain radius. I had no intention of attacking the banks. In fact, my expert Committee is to be very much on the type of a bank directory, and the functions of that committee would be definitely the same kind as those functions discharged by the directors of a bank.

Question—"That the Bill be read a Second Time"—put and agreed to.