Would the Minister state more clearly exactly what is intended by sub-section (4)? Is that simply a provision to enable him to deal with an emergency, or is it intended to use funds from various Departments and transfer them to the Local Loans Fund?
Local Loans Fund Bill, 1935—Committee.
Sections 1, 2, 3 and 4 put and agreed to.
SECTION 5.
Question proposed: "That Section 5 stand part of the Bill."
This is the borrowing clause in the Bill which authorises the borrowing of money on behalf of the fund, (a) by the issue of securities, (b) from the Central Fund, and (c) from Government funds. All these funds will be charged on the Local Loans Fund, all the liability being guaranteed by the fund, and any deficiencies in the interest and principal of the borrowed moneys are to be made good to the fund by advances out of the Central Fund. I assume that the Senator's difficulty arises out of sub-section (4).
Yes. I have heard criticism outside. Some people imagine there is something in that, and I asked the question to enable the Minister to explain and answer the criticism.
We have a considerable number of funds under our control which are invested in one way or another from time to time—some in National Loan, some in British bills and some in British loans. They are Government moneys, entirely under Government control, and the purpose of this section is to give the Minister power to utilise these moneys, if necessary, for the purpose of making local loans advances. He, in fact, has that power at present, because he can realise most of these investments. It is entirely a matter for his discretion. He can realise them and reinvest them in any national loan he may issue. It does not really alter in any way the power which the Minister has of investing these funds in Government issues; but it merely gives him, in relation to this fund, a specific power to do that.
These funds are not specially required for investments that have to be held and the purposes of which are stated?
None of these.
Have they been held because of any charges on them? That is the point.
Could the Senator be a little more precise?
These are all free funds?
Yes.
They are funds with no claims on them that can be put forward for any purpose?
Most of them are pension funds and funds of that sort. Such claims exist in regard to them. But, so far as the investment of the money is concerned, it is merely to put the Local Loans Fund in the position of any other trustee security in regard to the investment of Government moneys.
Do we weaken in any way the claims of the things for which the investments were originally made?
I do not think so.
For instance, in a solid investment the securities are solid. In the Local Loans Fund it will be met merely by the State.
By the Local Loans Fund, in the first instance, and, in so far as it fails to meet its obligations, by the State.
It might mean that the State is substituting its guarantee for solid securities.
I do not think that, so far as the people of this State are concerned, there can be any more solid guarantee, because the State is paramount in matters of this sort. Apart from this Bill, if to-morrow some person were to come in here and, regardless of the general interest, say: "Let us confiscate all these funds and have them invested in irredeemable stock issued by the State," there is nothing to prevent it. The position is that they are in the custody of the Minister for Finance and he can dispose of them at present in any way he wishes, provided he puts them into trustee securities. He might put them in Indian railways; he might do a dozen and one things which he has permission to do under the Trustee Act, but which, if he were well advised, he would not do. We are putting the Local Loans Fund in the same position as are other trustee securities relative to these existing funds, and it follows inevitably that we should have power to invest these funds in the new trustee security.
Question put and agreed to.
SECTION 6.
Question proposed: "That Section 6 stand part of the Bill."
The Minister has estimated £5,000,000 as the value of the assets of the British Local Loans Fund. I want to ask a question in relation to the Land Acts up to 1896. The advances under these Acts were made from the Local Loans Fund. In estimating the value of these assets at £5,000,000, did the Minister take account of the fact that the Government has remitted half of the annuity?
Yes.
Did you reduce the capital or only the interest?
We reduced the annuity and are taking the present value of the annuity at 3½ per cent.
Clause (a) of Section 6 (1) deals with loans that were not fully repaid, or that were remitted or written off before the appointed day. Does that sub-section apply to the case mentioned by Senator Wilson or only to amounts due under other Land Acts? Does it apply to local loans and, if so, under what circumstances were these remitted or written off? Were some amounts due by local authorities written off?
No.
Sub-section (2) says:—
When determining under the next preceding sub-section of this section the amount mentioned in that sub-section, the Minister shall not include in such amount so much of any local loan as the Minister shall consider to be irrecoverable.
I am rather surprised that no Senator asked why consideration has not been given to the fact that while loans due by local authorities have been retained in the Exchequer, the full contributions have been demanded and are being paid, practically 100 per cent., by local authorities. I am surprised that there has not been a demand for a concession to local authorities, in view of the concession that was made to land annuitants. I am not going to go into that question now.
That cuts both ways.
Many progressive local authorities borrowed rather extensively in the past for housing and other purposes, and many of these bodies are carrying considerable liabilities because of the rates they have to raise for the services of these loans. Because of that these local authorities are not able to-day to face up to what are supposed to be their obligations in the way of providing further money for housing and the other services that are deemed necessary. I believe that there were two types of local authorities: one that borrowed and built and that is carrying a very heavy liability to-day, and the other type that did very little of such work. You had one type of local body that attended to its business very well, and the other type that did not attend to business so well, whose officials, possibly, were inefficient, or the members negligent. The situation became so impossible apparently that the Minister was forced to put this sub-section into the Bill, making it possible to deem certain local loans irrecoverable or to be written off.
I would not read too much into it.
I gather, then, that there are very few local loans deemed irrecoverable or going to be written off. It occurs to me that the Minister would be doing a very good service in considering whether he could not in many cases write down the liabilities of local authorities. In many cases progress has been hindered by the dead weight of debts that these bodies incurred in the past. As a result development in many areas is impossible. A very strong case could be made by progressive local authorities, both county councils and urban councils, for reconsideration of the position they are faced with to-day. They can really make a sufficiently strong case for having their payments halved to justify the Minister doing at least something in that way. Possibly the Minister would then have to find the money that was going into the Exchequer elsewhere. Now that the assets are to be transferred to the Local Loans Fund, I think the position is that some of the assets could be written down. The writing down of the assets would in another way increase the security that local authorities are able to give for the provision of the fresh money that is so essential for development in many cases.
I wonder how far we or any other Government would get in carrying out any sort of constructive programme if we were, on such slight grounds as Senator Baxter advances, to consider releasing from their obligations debtors who, as a result of borrowing, have created very substantial assets for themselves. The loans which this section deals with and which the Senator is concerned with are loans advanced 21 years ago at very low rates of interest. In a number of cases they were advanced to finance housing, public health and sewerage works, all of which brought in very considerable returns to the ordinary rates. If there was a case at all to be made, I do not think there is one for the writing down of any loans which were borrowed upon such easy terms. The position would be made absolutely impossible for us. So far as we are concerned, we feel that everyone of these are sound loans—not irrecoverable. There is no reason why they should be irrecoverable. Many of them were advanced on easy terms and were spent in creating revenue-earning assets for local authorities. The position we are in is that we have to offer these and other advances as security for further issues which we propose to make in order to assist local authorities, who might not have been so fortunate, with the works which they have to carry out under more difficult circumstances. I think no person could possibly relate the position of local authorities to that of ordinary land annuitants. There the reduction was extended to all tenant-purchasers, irrespective of whether they bought out under the old Land Acts or whether they bought out under the Land Act of 1932. The reduction was general, and a very sound case could be made for it. I do not think any case at all could be made for writing down loans to local authorities.
I should like to know why in sub-section (4) there are so many references to errors in calculation and corrections that may be made in the certificates:—
If at any time after the issue of the certificate mentioned in the next preceding sub-section of this section it shall appear to the Minister that the determination the subject of such certificate was erroneous by reason of an error in any calculation or estimation on which such determination was founded, the Minister may amend such determination ....
I do not think there will be many errors made, but we have to provide for the possibility that corrections may have to be made. That is the purpose of the sub-section, and that is the draftsman's way of permitting us to do so. One of the determinations which will have to be made will be the actuarial value of the collection to be made on the 1st May. We cannot value that collection until it has been made. We cannot value the assets on the credit side. We have to make a provisional valuation for May 1st, and this is the only way that we will be able to get a final evaluation of assets transferred.
I can quite see that, but the words are "as soon as conveniently may be." This return will be of very little use to us if it comes in, say, a year hence. Would the Minister tell us what the convenience in this matter is?
I can say that it will be before the 31st March, 1936. We may have it before 1st October, or sometime about 1st October.
Is that the corrected one?
The final one, but I cannot bind myself because if, as at present advised, we can only issue a second certificate, we shall have to be certain it is correct before it is issued.
This year will give us the answer?
Yes.
I was unfortunately away for a good deal of the time, but I notice that the question of what happened in 1926 was brought up. I do not dispute at all that the Government has a right to claim that inheritance from the British, but I think that, considering the circumstances of the case and that times were bad, it might have been a good way to make a present of it to the farmer, in spite of the arguments advanced. I think a free inheritance of that sort might have been used for the benefit of the farmer.
I am afraid the farmer would not get the major part of the benefit, from what has been suggested here. I think it is the townspeople who would come in for the larger share.
Section 6 agreed to.
SECTION 7.
Question proposed: "That Section 7 stand part of the Bill."
Would the Minister explain sub-section (4)?
The purpose there is to give us power to exchange securities from one to another. They all have the same Government backing, and it is merely to make it easy for the fund to borrow from the Exchequer or repay its advances to the Exchequer, as the case may be.
How does the Telephone Act come in?
The Telephone Act comes in in this way, that, though the moneys are borrowed out of the Central Fund, their repayments are, at the same time, provided for by a Vote, and it is simply mentioned as one of the ways in which the money in Local Loans or the Exchequer balance may be used to finance advances under the Telephone Act.
Section 7 agreed to.
Sections 8, 9 and 10 agreed to.
SECTION 11.
Question proposed: "That Section 11 stand part of the Bill."
Sub-section (1) says:—
All balances standing from time to time to the credit of the capital of the fund or of the income of the fund and not immediately required for making payments out of the fund may be invested at the discretion of the Minister in all or any of the following ways, that is to say, in the purchase of securities issued under this Act on behalf of the fund, ....
That, I suppose, means that if, under this Act, there were any securities issued for the Local Loans Fund, the Minister might put the money back into it.
They could be purchased by the surplus income of the fund.
It gives that right to invest in those securities. It goes on:
.... or in making advances to the Exchequer on the credit of ways and means or in Exchequer bills.....
Ways and means for a Government are matters which we bankers have to deal with, and when it comes to advancing money to a Government on ways and means, the Minister knows very well that we make very distinct arrangements, as to specific periods and terms of payment. Ways and means for Government expenses are meant for current matters and do not, as a rule, I imagine, come in at all in respect of making advances to the Exchequer, except for temporary purposes. I should like the Minister to explain how the purchase of securities would be properly dealt with under the same clause as advances to a Government for ways and means. I should not have thought the Government would deal in that way with securities at all—that ways and means advances are like what an ordinary customer gets. He wants money for six months, and he goes to his bank and says: "Lend me this money." The banker lends it to him, and it is paid back at the end of six months, but from the use of these particular words it seems to me as if solid money was going to be invested in what were merely the temporary dealings of the Government. I should like the Minister to tell us if he means that we are going to see the Government using, as ways and means advances, funds which are required in this way, because I should have thought that was rather outside the proper financing of Government accounts.
It is not intended that this will be generally availed of in the same way as ordinary ways and means advances would be. It is intended to deal with a position which we found created some difficulty in connection with the National Loan Sinking Fund—where moneys were surplus because the National Loans could not be bought except at a premium and could not be otherwise employed. Moreover we wish to be able to utilise the surplus money to the credit of the capital account but which were only likely to be surplus for a short term, either in the form of ways and means advances or in the purchase, under Section 17 of the Finance Act, 1930, of short-term obligations of the British Government. It is not the general intention that there will be a floating overdraft financed out of borrowed moneys. It is merely that, if we are providing the Fund with a book asset of £11,000,000, and if they happen to have a few hundred thousand pounds or a limited sum of money available for investment for a limited time, instead of leaving it lie idle it may be used, if it is wanted by the Exchequer, and repaid to the fund in due course at the end of the year, or that if the Exchequer does not require it, it may be invested in short-term obligations of the British Government. That is the real purpose of it. It is to prevent these moneys lying dormant when there are no securities in the market available for investment of the Sinking Fund. We have often had to carry large cash balances on the Sinking Fund of some national loan because we could not purchase loan stock.
I quite see what the Minister means but this is one of the matters I should have liked to have seen left out. The sub-section says: "... in making advances to the Exchequer on the credit of ways or means or in Exchequer bills ..." and I think it is a pity that the Government should put these words into a Bill of this nature. It was one of the things I had in mind as wanting inquiring into and I would have tried to get them taken out of the Bill because I do not think these sorts of funds ought to be dealt with by the Government under Ways and Means or Exchequer Bills. The Government take plenty, and the amount they can borrow in all these ways should enable them to make their arrangements outside. But to take funds in this way and to use them in this way is a system of financing that ought not to be adopted by the Government. I suggest that this Bill would be much less objectionable if these words were out of it.
Why should we take these words out of the Bill? After all, the Government is the ultimate guarantor behind this scheme of financing. The Senator indicated that the real attraction for local loans is that the State is behind them. We are the guarantors, and if there is a fund, and if we want what might be described as a working overdraft, are we not entitled to use these moneys in the same way? It we agree that the fund might be invested in short-term securities of the British Government, I do not see how objection can be made to allowing us to use it for a short-term also. It is not the only way in which we may use Ways and Means advances. The Post Office can make advances to Ways and Means. There is no great principle at stake here that has not already been admitted by the Oireachtas.
I have no more to say on the matter. We all know that Ways and Means provide money that may be required as temporary overdrafts. The Minister of the day who uses moneys from this fund in that way could easily get us into trouble. It is quite different from ordinary investments. The Minister says he will not take these words out. I suppose they have got to be left in, but I am very sorry for it.
Section 11 agreed to.
Sections 12, 13, 14 and 15 agreed to.
SECTION 16.
Question proposed: "That Section 16 stand part of the Bill."
Some Senators whom I expected to take part in the discussion of this section are not here. This section deals with deduction from local grants of money due to the fund. It provides that
where any sum .... is due and payable to the fund by a local authority the amount of such sum may be deducted from any money payable to such local authority by any Minister for any purpose whatsoever.
That power of deduction is one of the things that I thought we would have had some debate about.
Leas-Chathaoirleach
There seems to be no opposition, Senator.
I agree, but I simply mention this as one of the things that I thought was worthy of debate.
On that point, what does the section permit us to do? It permits us to deduct from any sum payable by the Government to the local authorities any arrears of interest due on foot of local loans or penal interest. I think it would be asking too much of the Government to forego that right. If we are to make grants and to pay sums to local authorities, surely it is our first duty to see that they discharge their obligations to the State, and meet their promises.
Yes, but it might cause the local authorities a great deal of trouble. The section says:—
where any sum .... is due and payable to the Fund by a local authority .... for any purpose whatsoever.
Because there is a local loan shortage, the Minister may stop money going out for any purpose whatsoever. In this way a considerable amount of hardship might be inflicted on local authorities.
Leas-Chathaoirleach
Land purchase shortage is what can be deducted.
This power would, in practice, only be exercised in regard to local taxation grants. I think it would be a very bad case where we would go outside these grants and deduct from other moneys. We shall not have to use these powers except very rarely, but it is a very salutary power.
I agree, but if these words could be modified it would be all the better.
Do these words really add to the present power and practice? I have a notion that the powers given here are at present in the hands of the Minister. This Bill is not increasing that power, as I understand.
They are there already to an extent.
If they are, I would take out these words and rely upon the powers he has already.
As far as local taxation grants are concerned. This relates to other sums but, as I explained, it will not be necessary to act because the amounts due would not in general exceed the amount of the grants. Another thing, it enables us to recoup ourselves without a High Court order. While facilitating us in that way, it is also in the interest of the borrowers because, when we get an order, the costs are charged against them.
Section 16 agreed to.
Sections 17, 18 and 19 agreed to.
Title agreed to.
Bill reported.