Trade Loans (Guarantee) Bill, 1938—Second Stage.

Question proposed: "That the Bill be now read a Second Time."

Minister for Industry and Commerce (Mr. Lemass)

This Bill is designed to continue the Trade Loans (Guarantee) Acts. As Senators are no doubt aware, the Trade Loans (Guarantee) Act was operated for a fixed period of time, namely, five years. That five-year period expired last year, so that the Act ceased to be operative. The sole purpose of this Bill is to continue the Act for another five-year period. In the ordinary course it would be a purely formal measure which would arouse little comment, apart perhaps from discussion upon the manner of its operation. In the circumstances of this year, however, perhaps it is necessary to say something more than that; to explain the decision of the Government to proceed to enact this measure, and continue the Trade Loans (Guarantee) Act, having regard to the fact that the Banking Commission, in its report, recommended that that should not be done. I dealt in the Dáil, in the Second Reading debate on this Bill, at some length with the considerations which swayed the Government to reject the advice of the Banking Commission and to submit this measure that is to continue the Trade Loans Guarantee system. The objections of the Banking Commission were very largely theoretical and, in fact, some of them were not entirely related to the facts. Their conclusions on the matter appear to me to have very little behind them. At any rate, so far as their report went, it did not give any very adequate reasons to justify the conclusions which they set forth.

I am satisfied that in our circumstances the continuation of the system is necessary if we are to facilitate industrial development of a kind which it is most desired to see undertaken here. Industrial concerns can be classified in three distinct groups. On the one hand, you have the individually-owned concern, the factory that is operated under the management of its owner, the owner providing the finances necessary for its establishment and conduct out of his private resources. At the other end of the scale, you have the large public company which is able to go to the public direct for whatever capital it requires, but in between there are a large number of concerns which are somewhat too big to be financed out of the private resources of individuals and too small to make a direct approach to the public practicable.

It is in relation to the medium-sized classes of concern that the utmost difficulty has arisen either in regard to meeting their capital requirements or providing the capital necessary to finance extensions in their operations. In certain cases, of course, concerns of that magnitude have been able to get the accommodation they needed from banking institutions; but in the ordinary type of case the banks do not regard the advance of loans on long terms as coming within their proper sphere of operations, and have only agreed to make loans of any substantial amount when backed by a State guarantee given under the Trade Loans (Guarantee) Act.

I do not think that we have reached the stage in our industrial development, or in the development of financial institutions here, when we can afford to do without the Trade Loan Guarantee system. It is, of course, desirable that State commitments of this kind in relation to industrial projects should be limited, but, having regard to the programme we have before us, and the need there is for the promotion of industrial development and the provision of employment in industrial occupations, it is our opinion that we cannot afford to divest ourselves of this particular weapon, apart from the purely financial considerations that are involved. There are many other considerations of an important character such as the provision of employment, the reduction of imports, the decentralisation of industry and the provision of industrial employment in rural rather than urban areas, which make it necessary for the State to be able to give financial assistance in this form to industrialists where financial accommodation would not be provided if purely banking considerations applied.

The objections of the Banking Commission to the continuation of the system were somewhat vague. The commission made reference to the high ratio of loss experienced since the first Act was passed. It is true that if one examines only the total amounts involved, there appears to have been a high ratio of loss, but an analysis of the figures is necessary in order to understand the position. The first Trade Loans (Guarantee) Act was passed in 1926 and operated until 1929. The Acts continued legally in force from 1929 until 1932, but, in fact, they were not operated during those years, the Government then in office allowing them to become a dead letter. At any rate, no guarantees under the Acts were given during that three-year period. By far the greater proportion of the loss which was incurred arose out of guarantees given before 1929, and, in fact, arose almost entirely out of three cases which were the subject of much public discussion and debate in the Dáil and Seanad at that time. Since 1932, the ratio of loss has been very small, although in 1933 we amended the Act to make provision for guarantees for working capital. That is one aspect of the present system to which the Banking Commission took objection.

I think some significance attaches to the results of the working of the Act since 1933 as compared with the results of the working of the Acts prior to that year. In the interim there had occurred a considerable change in Governmental policy in relation to industrial development. That change had operated to make investment in industry here more secure, so that the prospect of loss arising was substantially reduced. The ratio of loss since 1933 was, in fact, so small as to be almost negligible, certainly negligible when compared with the results secured, results which are, I think, well worthy of mention here. According to the statistics which I gave the Dáil, there are at the present time 66 industrial concerns being actively carried on in this country with assistance under the Trade Loans (Guarantee) Acts, and the total number of persons employed in the industries concerned exceeds 5,600. The salaries and wages paid to them over last year exceeded £500,000. Having regard to the fact that our total losses to date since 1933, in respect of guarantees given under these Acts, amounted only to £13,000, I think most Senators will agree that the risk involved in continuing the Acts is altogether insignificant in relation to the great advantages which it is possible to secure: advantages in employment, and in the distribution of wages to workers here.

The Banking Commission made another objection of a somewhat vague character to the continuance of the Act, in drawing attention to the fact that many of the concerns which got assistance from the State by means of guarantees for loans depended for their existence upon the maintenance of Government policy or the exercise of Ministerial discretion in their favour. They urged that that situation must be a cause of embarrassment to the Minister concerned and to the Government as a whole, and might at some stage induce decisions contrary to the public interest. I stated in the Dáil that I could not find in the minutes of evidence published by the Banking Commission any indication of the source of their information which led them to consider that possibility. So far as the evidence goes, it showed that nothing was brought to their notice by anybody which might give rise to that idea.

I think that the members of the Banking Commission were assuming a state of affairs which they had no reason to believe existed. My experience, during the period of five years in which this Act has been actively operated, has been that no such embarrassment as that anticipated arose, and that in fact there was no difficulty in reconciling the position in which the State had financial commitments in the success of particular industrial concerns with the public interest in general. In fact, it is, I think, a false assumption to conclude that the public interest must necessarily be opposed to the success of these particular concerns. In any event, the Government do not agree that in the considerations put forward by the Banking Commission there was sufficient justification to discontinue these Acts and leave the State without the power to guarantee loans where the giving of such loans would appear to be likely to promote additional industrial developments here and create additional employment for our people. We are consequently bringing this Bill to the Oireachtas. The Bill involves no change in the system. It merely continues the Acts in force for another five-year period, and extends by £1,000,000 the limit of the extent to which loans may be guaranteed or made.

Senators may be confused by references in the text to the giving of loans or the giving or guaranteeing of loans for purposes other than the financing of capital or manufacturing undertakings. There are references in the Bill for example to the giving or granting of loans the effect of which might be the reduction of the cost of commodities. That provision was in the original Act and it has been continued in each of the amended Acts since, and is being continued in this Bill, although since the first Act was passed no case arose of an application for this purpose, nor has any loan been given under the powers conferred on the Minister in that respect. There have been a very large number of loans guaranteed and the only applications which were received and favourably decided on were applications for the guaranteeing of loans.

I am sure that Senators are all familiar with the system under which trade loans are guaranteed. An applicant comes to the Department of Industry and Commerce seeking a State guarantee for a loan which he proposes to raise. That application is considered by in advisory committee composed of business people who act voluntarily at the request of the Department. The committee give their recommendations on the application to the Minister for Industry and Commerce. The Minister is not bound to accept their recommendations and there have been numerous cases in which a favourable recommendation from the committee has been rejected by the Minister or in which an unfavourable recommendation was not acted upon by the Minister. The Minister if he thinks fit, decides to give the guarantee and then seeks the concurrence of the Minister for Finance. If the Minister for Finance concurs, the applicant is informed that the Government is willing to guarantee the loan, probably on specified conditions.

It is then for the applicant himself to negotiate the loan. He goes to his bank and seeks to get the amount he requires advanced by it on the basis of the State guarantee. The rate of interest is fixed by the bank. There is an arrangement at present in existence between the State and the banks under which the banks undertake to grant these loans at a rate of interest one half per cent. under the existing bank rate. The State guarantee does not cover, and has not covered since 1933 the whole of the interest. They guarantee only to the extent of 2½ per cent. and the banks have accepted that arrangement. The borrower is, of course, free to get his loan anywhere he likes and subject to any additional condition he may wish to accept on the suggestion of the lender. It is open to the applicant to make whatever arrangement he desires with the lender subject only to the conditions which the lender imposes.

The loans are repayable by fixed annual instalments and the State's obligation to make good this guarantee arises only when there has been a substantial default in the payment of interest. We have, of course, power to exercise discretion in that matter and sometimes have been lenient in the case of businesses which have run temporarily into difficulties but appear to have good future prospects, but where it appears clear that the project is not going to make good a receiver is put in by the Minister for Industry and Commerce who seeks to realise from the assets the greatest amount he can for the benefit of the Exchequer, the State taking over the full obligation to the lender to repay the amount advanced and the interest due to the extent of 2½ percent.

I do not know if it is necessary to give here again the statistics which I gave in the Dáil as to the extent to which the Act has been utilised. These statistics are all set out in the Dáil debates. They indicate that the facilities available under the Act have been utilised to a large extent and have been instrumental in promoting a great deal of industrial activity within the country. While it is probable that the Acts will not have to be utilised to the same extent during the next five year period, it is nevertheless desirable that they should be there and that the power to guarantee loans for industrial purposes and other capital undertakings should be available to the Government. It is open to the Government to decide not to operate the Act or to utilise its powers under it if they think that the circumstances justify such a decision, but it is not desirable that they should be divested entirely of the power. That is the reason why this Bill is being put forward at the present time.

Professor Johnston

I suppose I will have to take a certain line in relation to the proposals of the Minister and, as usual, that line will be somewhat opposed to the general contentions he has made in his eloquent speech. The first thing that strikes me with reference to this proposal is that it is in flat defiance of one of the quite important recommendations of the Banking Commission. I do not regard every word issued by that body as sacrosanct yet, at the same time, it was a body of world-renowned experts on whom the State spent £10,000 and they did issue a report and I think we must attach considerable importance to and, at all events, consider very carefully all their recommendations before deciding to fly in the face of any one of them. As it is at present, this looks like keeping a dog and barking yourself. I admit that the Minister for Commerce is a very expert barker.

I do not propose at the same time to repeat the arguments used by the Banking Commission which are doubtless familiar to all of us. In that connection, I might say that if they will not hear Moses and the prophets, neither will they be persuaded though one should rise from the dead, and if the arguments used by the Banking Commission are unable to persuade you in these matters it is perhaps somewhat unlikely that my eloquence will avail. But, there is one point in particular which is, I think, the chief consideration advanced in that report that I should like to say a word or two about. That is this: the Banking Commission said that it must be a very embarrassing situation for the Minister to find himself in if he has guaranteed a loan to a certain industry and if that industry is obviously not doing particularly well and the loan is unlikely to be repaid, it must, in such a case, be a great temptation to him to use his powers of granting a monopoly to that industry as a means of bolstering up its financial position and making the loan appear a good asset from the point of view of the Government and the taxpayer. We must, of course, believe the Minister when he says that he has never felt any embarrassment in making decisions of this kind and he has never sacrificed the public interest in furtherance of the interest of any private industry which was related in that way to State finance.

But, at the same time, I must say that if I were in the position of the Minister, being perhaps, at all events, a different person to what he is, I should feel the gravest possible embarrassment if I had to make decisions of that kind, and I would be tempted, very much tempted, in the interests of my party or of the Government, to buttress up a weak financial position by giving monopoly privileges to an industry which owed money for which the State was responsible for the repayment. The granting of monopoly privileges in such a case appears to save the taxpayers' money, and doubtless, does save the taxpayers' money, but it involves a principle which is most objectionable, and that is the principle of granting to a private interest rights of private taxation which are likely to cost the consumer generally far more money than the taxpayer is saved. I want the Seanad to consider carefully whether it is good economics, although it may appear good finance, to save thousands of pounds for the taxpayer by granting monopoly privileges— powers of private taxation—which may possibly cost the consumer tens of thousands of pounds. In that matter we have had growing up in recent years what amounts to rights of private taxation by monopoly interests and which have added greatly to the burden which the general community bears, who, in addition, must pay public taxation for which, at all events, they get some return by way of public service. To illustrate what I mean, I need refer only to the report of the Bacon Prices Tribunal, in which it appears that excess charges of between 8/- and 16/- per cwt. with reference to the annual consumption of bacon of less than 600,000 cwts., must have cost consumers in this country annually something in the region of £350,000. I regard that as simply and solely a form of private taxation in addition to the burden of public taxation, but, unlike that burden, something in exchange for which the ordinary consumer obtains no return.

If that burden of private taxation with reference to the consumption of bacon is typical, and it is, I believe, typical, the cost of living in the country generally is probably inflated by a co-efficient which I would be inclined to put at fifteen times that amount, in which case we arrive at an estimate of taxation by private monopoly of the sum of £5,000,000 a year. At all events that is my guess. Already public taxation amounts to some £30,000,000 a year and absorbs one-fifth of the national income, which cannot be put any higher than £150,000,000. Now, the proportion absorbed by public taxation has reached the alarming total of 20 per cent. of the national income and, in that connection, I may remind you that although public taxation in the neighbouring country has gone very high in recent years, the proportion of public taxation to national income is not much more than 20 per cent.—it may perhaps be 25 per cent.—and they are bearing terrific burdens in the way of rearmament, of which only a small proportion devolves on us.

The next point I want to make is that the growth of public enterprise and the economic activities of the State, whether reflected in legitimate public taxation or illegitimate private taxation facilitated by State action, that take place in a situation in which the national income as a whole is not increasing, produces a situation in which the credit of a genuine private enterprise, meaning an enterprise which must be carried on without protection or privilege from the State, is undermined and, as it happens, in spite of the liberal distribution of industrial privileges, the great bulk of economic activity remains in the category of unprotected, unprivileged private enterprise. The credit of the producer depends on his ability to get back from the ultimate consumer a price which covers the cost of production and leaves a profit for the producer. If the State by its expansion of public taxation, and by its encouragement of the growth of private taxation, absorbs an increasing proportion of the national income, then the amount of money left in the pockets of consumers available for expenditure on the products of unprotected and unprivileged private enterprise is diminished. To that extent, the credit of unprotected enterprise is undermined and that, I submit, is the most important national economic interest that we should take into consideration. The more you take by legitimate and illegitimate taxation from the consumer taxpayer—for the consumer is also a taxpayer—the less money he has to spend on the products of unprivileged enterprise. It is the case of unprivileged enterprise I would seek to develop before the Seanad to-day. Agriculture I would regard as an outstanding example of unprivileged enterprise, although even there, attempts have been made within recent years to introduce privileges for certain sections of the industry, notably dairying, beet and wheat. So far as the most recent information available to me is concerned, the national income was not more than £150,000,000 in 1935, not having returned to its 1929 level when it stood at £162,000,000. If you had a situation in which the State, by its economic activities, was doing something which helped to expand the national income, then these considerations, which I mentioned just now, would not apply with the same force and the money left in the pockets of consumers, after paying public and private taxation, would be greater and more plentiful for expending on the products of unprotected industry, but when you have this rigid figure, representing national income, we should be very careful of doing anything that tends to expand the volume of legitimate or illegitimate taxation.

My chief objection to the Bill then, is that it puts in the way of the Minister, a temptation which should not be in the way of any Minister, a temptation to use his powers of interference with commercial intercourse, to grant an industrial monopoly in a way which is contrary to the public interest and which might prevent serious criticism of the kind that would result if the Government met with serious losses in connection with a matter of this kind. I have the greatest personal admiration for the Minister himself, and I only regret that his great eloquence and debating skill are not harnessed to a more worthy cause. If he really wanted to promote prosperity, the best thing he could do would be to go to sleep like Rip Van Winkle, remain asleep for the next ten years and slow down all this business of too rapid industrial development. Then when agriculture and other forms of economic activity had time to catch up, we might be able to resume the industrial policy with some possibility or prospect of success.

Mr. Baxter

Senator Johnston has said exactly the thing that was in my mind about the Minister. I am quite convinced that the Minister's energy or the Minister's "drive"—I shall not use a very nasty word—has created more difficulties for the country than all the other plagues to which we have been subjected for the past six or seven years.

Mr. Quirke

Including the Fine Gael organisation.

Mr. Baxter

I know it is very difficult to say anything unpleasant about the Minister for Industry and Commerce in this House without being subjected to interruption. I suppose in a way that is not unnatural, but whether it is pleasant to the Minister or not, I am expressing the view which I hold very strongly that, if he had not one-tenth of the energy which he has, if he had not one-tenth of this ill-founded enthusiasm for establishing industries, he would have given the country the kind of chance that it should get. We are going to have another Bill to-day on which more can be said about this aspect of Government policy. The Minister, I am quite satisfied, will, as usual, if he cannot make a good case against the arguments which have been put forward, get on to false premises and make a defence of his policy on points totally different from those which have been put forward by speakers from this side. He is very clever at that. He will put into the mouths of speakers something that they never said at all and build up a case on that. You cannot, however, build up Irish industries on that sort of foundation.

The Minister has told us that this Trade Loans Act in the past was instrumental in creating 66 industries employing 5,600 people, earning about £500,000 annually, and he added that there had been a total loss of only £13,000. What I want to point out to Senators on the right—they are supposed to be on the right for the moment, but they should be left—is the plight of the agriculturist to-day. When you know how badly the farmers of the country need money, when you think of the fact that 19,000 fewer men were working last year on the land than the previous year; when you think, on the other hand, of the fact that these 66 industries employing 5,600 people meant a loss of £13,000 to the State, that the Minister is going under this Bill to get a group of business people to pass judgment on applications that will come in for loans, of the fact that if the loan be passed by the committee, it may or it may not be passed by the Minister, but that if it gets the imprimatur of the Minister, the man who applies for the loan will get the Minister's cheque to go into a bank and get as much money as he requires, you can see this policy in its true perspective. How can Senators over there, who talk sometimes about the rights and wrongs of the farmers, stand for a policy of financing these little industries in towns, big and small, or out on the mountain side——

Mr. O'Donovan

Or down a back lane.

Mr. Baxter

I am not saying anything about that. I am asking you to think of how these men can be assisted to get money under these conditions. Think of the two things side by side. The chief fault I have to find with the Minister is that he has gone too far ahead of his colleagues, particularly of the Minister for Agriculture. That is really what is wrong in the country. If the Minister could pull the other members of the Cabinet along with him, or even keep them abreast of him, then complaints about the Minister's policy would have less point. When we know what the Minister's own supporters are saying, when we know the necessity of aid for agriculture, when we see what is being done for small industries while the big industry of the country is at a standstill or is going downhill, that it has to wait until Doomsday for help, and when we see this unbalanced economy, we cannot be expected to approve of the Minister's policy.

There are other aspects of this policy to which Senator Johnston has referred, and to which the Banking Commission adverted in their report. I do not want to stress it unduly, but, say, I made an application under this scheme for a loan for an industry, and it came up before this committee, and the committee seemed to think that it might not be a bad proposition, I am very doubtful about what the Ministerial decision would be. If I had no doubts about what the Minister himself might say, I am quite convinced that, as soon as it was known that I was putting my hand to starting a new industry, and that I was seeking assistance under the Trades Loans Act, as far as the politicians are concerned, I would not get it if they could prevent it. You may say what you like, but nothing that is said will succeed in convincing quite a number of people in this country that that is not possible under the scheme.

I feel myself the Minister has gone altogether too far in his efforts to industrialise us. Some people come along with an idea, and the Minister, in his desire to get something done, rushes ahead with it, but very frequently no consideration is given to the question of whether the industries can stand or not. You are bound in such circumstances to come up against the position that quite a number of industries are facing to-day. I am not saying that these industries have been financed under these schemes at all. In fact, quite a number have not. In fact, some of them have been financed partly out of public subscriptions, and some by individuals who were energetic enough or had courage enough to put their money into them. Quite a number of these industries are in a parlous condition now. The Minister seems to think that we are not going to have a very great rush on these loans in future. Does he anticipate we are going to have a slowing down, that we are becoming so saturated with industries that we are not going to have as many demands as in the past, or is the Minister going to see——

Mr. O'Donovan

Going to sleep.

Mr. Baxter

——that when applications are made in future there is going to be such an examination and scrutiny of the possibilities of every industry that fewer of them are going to get facilities under this Act? I think it is generally agreed that the Minister's drive has been too terrific. The pace he set has been too hot. Even he himself is not able to-day to father all the new things he has brought into existence in the country. It is very difficult to feed a number of them. The people who are expected to feed their children down the country have to strive very hard on the hillsides and on the plains to feed the little ones in their own homes; and every new industry which is started and kept alive under these conditions puts an additional burden on an already overloaded back. The Minister may think he has justified himself by adding to the number of new industries by this Act or some other Act, but in the long run this is a policy that is not going to prove fruitful. In the long run, it is going to do more to injure native industry, and to damp down native enterprise, than if there were a slow, cold, calm examination of the position, and if people were encouraged to face problems and tackle schemes only when they are tolerably satisfied that they can be made a success.

If the Minister's colleagues were ready to stake the credit of the Government in order to find money for farmers who would employ far greater numbers of people if they were able to get their factories working than will be employed in any of these new factories which the Minister hopes to bring into existence under this scheme, many of us would be prepared to readjust our view. But while the Minister is putting forward this scheme and leaving the people of the country to struggle uphill with all these burdens, neither he nor those who sit behind him can expect ordinary, rational, sensible people, with their feet on the earth, to get enthusiastic. I agree with Senator Johnston that it would be better for the country if the Minister would give it a rest. If it cannot get that rest with the Minister's two eyes wide open, it would be better if he would go to sleep.

Mr. Quirke

I am sorry if I have not sufficient intelligence to appreciate the dry humour which Senator Johnston directed against the Minister for Industry and Commerce. Very few people will see eye to eye with the Senator. He pictured the Minister as a man who keeps a dog and barks himself. It is hardly necessary for me or anybody else to stand up to defend the Minister. I am quite sure he is capable of doing any barking necessary. When it was a question of biting, he was able to do that, too, and I am sure he would be able to do it again. I know something about dogs. Some dogs bark for no reason but their own amusement. They are known as "babblers". I am afraid we are getting a few of them into the Seanad.

I read the debate in the Dáil on this Bill and there was very little opposition to it. I cannot see any justification for the opposition here. In this debate, as in other debates, we have the suggestion that the Minister may use his powers to the detriment of the community in general, that it is not safe to give him certain powers lest he use them recklessly. That is a ridiculous suggestion. If the Minister were of that type, he would never have got to the position in which he finds himself. That applies to the past as well as to the present. People do not elevate men of that type to such positions.

If we go back on the legislation enacted during the terms of office of the past or the present Government and pick out any Bill, we shall find that if the Minister used all the powers given him under that Bill recklessly, he could have rendered the country insane. It seems like courting popularity to attack the report of the Banking Commission, but I am glad it is not the intention of the Government to accept the Banking Commission's report in toto. I do not propose to deal with any other portion of the report except the section relevant to this discussion. I do not see how the Banking Commission arrived at the decision they did in connection with this scheme of trade loans. If we had arrived at the stage of over-production, there might be some excuse for the report, but we have not done that yet and, in my opinion, we are not likely to reach that stage for a considerable time.

Senator Baxter proceeded on the same line as Senator Johnston. He started off by saying that he was in thorough agreement with Senator Johnston, that the Minister's policy was all wrong, and that he should go away to Spain or somewhere for ten years. I ask Senator Johnston and Senator Baxter if that is the Minister's policy and the Minister's policy only. Surely everybody realises that it is the policy of the country, and that if Senator Baxter and Senator Johnston could get the majority of the people to agree with them, they could easily change the Minister for Industry and Commerce and the policy of the Government. Until they find that they have a minority of reasonable size in the country in agreement with them, as they have not at present, they should not make the ridiculous speeches we have had to listen to to-day. It is well known that the drive of the Minister, which has been condemned in strong language to-day, is appreciated not alone by the Minister's supporters but by people of other political opinions. They have not been slow to voice their appreciation of the Minister's efforts on every possible occasion. The suggestion is that the Minister, by his drive, force and energy has caused terrible destruction. The Minister has the support not alone of the Fianna Fáil people in the country, who themselves constitute a majority, but the support of the majority of the Opposition. Just because Senator Baxter does not agree with that policy, there must be a stop put to the Minister's gallop and he must be sent away for ten years.

I realise that the Minister has caused considerable embarrassment to Senator Baxter and other people on several occasions and I hope he will continue to do so so long as they are in opposition to a policy which is the policy of practically the entire people.

I believe that the policy of continuing this trade loan system is very sound. Without going into the figures, the results have, so far, justified it. Were it not that trade loans were available for Irish industry, we should have a very different position to-day. In other countries, they have not the tradition we have and it has been found easier in those countries to establish industries through the normal channels. Here, because of tradition, if you like, that has not been found possible in many cases and in respect of particular types of industry. Because it was not found possible to start industries through the normal channels of finance, the trade loan system is necessary. This system has been in operation in other countries and I understand it was largely responsible for the great development of industry in the United States. A similar arrangement exists there and has been availed of all over the States. As a result, industries were built up which could not, in ordinary circumstances, have been developed. From my own knowledge, I can say that numerous industries have been helped out by this system here. If it were not that such assistance was available, some of these industries would have come to the ground. Perhaps Senator Baxter would think that that would be a great day's work for the country. Would the Senator go into his own constituency—if a Senator can be said to have a constituency—and say it would be a very good thing if the boot factory in Cavan went out of existence?

Mr. Baxter

What boot factory?

Mr. Quirke

I understand that there is one there—the factory that the Senator told us a month ago made bad boots and gave people rheumatism. I take it for granted that the Senator did not refer to the Clonmel factory, because the Clonmel factory makes good boots. All the people in Tipperary stand up for their factories and would stand up for them even if their products were not good. They would say they were. If Senator Baxter holds the opinion to which he gave expression, he should go to the people in his own area, the people with whom he is personally acquainted or associated, and advise them to let these factories go "burst". Some of these factories started out with barely sufficient capital to keep moving. When they got started, they found that they were not able to produce sufficient quantities to carry the overheads and that it was necessary to extend. Were it not that the trade-loan guarantee system was there to help them, these industries could not have extended and the country would have been worse off to that extent. If any of these factories had failed—even the back-lane factories which we used to hear so much about but which we do not hear so much about now—it would have been a loss to the country. I believe that Senator Johnston and Senator Baxter will find it very difficult to prove that the production of wealth in the field of industry is detrimental to agriculture. That is a false doctrine. The more development there is in industry, the more customers there will be for the products of agriculture.

If we were to go back on the history of our own country, we should find that the statements made by Senator Baxter and Senator Johnston with regard to Irish industry would not hold water. Many of the industries we have to-day are not new industries. They are old industries, revived under what Senator Baxter would describe as the "destructive policy" of the Minister for Industry and Commerce. As a result of that policy, we have to-day in various little towns in the South, North, East and West, thriving populations living on the wages derived from these industries. One of the desirable features of the trade-loan guarantee scheme, as I understand it, is that the Minister will be in a position to grant a trade loan to a company which is starting in industry. I was interested in various undertakings and I know that the Minister would be prepared to sanction a trade loan provided the factory were set up in a district in which he considered a factory was necessary, from the point of view of unemployment and for other reasons. I believe that that is very desirable. We are told that the Minister would possibly be influenced to give preferential treatment to certain industries because of the existence of a trade loan. I believe the Minister will have, as he has, a definite interest in every industry, regardless of whether it is financed by trade loan or not. That is very desirable and I can see no reason for any objection on that ground.

Senator Baxter says that the Government will not agree to a Bill to give farmers money. It is hardly necessary to remind Senator Baxter that the Government has agreed to a Bill to give farmers money. That Bill was introduced by the previous Government who put on the board set up under that measure no less a person than Senator Baxter.

Mr. Baxter

They were very different from these conditions.

Mr. Quirke

That does not please Senator Baxter. Apparently nothing will please him. The Senator knows very well that loans in excess of £2,000,000 were sanctioned when he was there, but he comes along now and says that he feels that the Government will not sanction giving anything to agriculture.

Mr. Baxter

I did not say that.

Mr. Quirke

The Senator was a little embarrassed and mistook the applause for criticism. He thought someone was going to contradict him. He will get used to the applause after a time. I do not think there is much necessity for anybody to stand up to support this Bill. It is obvious that it is necessary. It may not be necessary after a certain number of years, when the people begin to get confidence in Irish industry. I believe that in another five years the people will have far more confidence in Irish industry. They will know that industries have come here to stay, and gradually it will be possible to finance them through the ordinary channels. Perhaps after five or ten years, if Senator Baxter comes back, we will give him all the applause he got to-day, but did not appreciate.

Mr. Baxter

As a matter of personal explanation, may I say that Senator Quirke either misunderstood what I said, or considerably misrepresented what I did say. I pointed out that under this Bill the Minister for Industry and Commerce was giving industrialists a cheque to go in and borrow from the banks on Government security. My point was that they would not do that for the farmers.

Mr. MacDermot

My attitude towards the general policy of the Minister for Industry and Commerce is considerably more friendly than that of Senator Baxter or Senator Johnston. In fact, in the main, I have been a supporter of his policy, merely objecting to its being carried out simultaneously with a policy so damaging to agriculture, as was the policy of the Government until recently. Unlike Senator Johnston, I should be sorry if the Minister for Industry and Commerce were to go into a swoon like the Sleeping Beauty for ten years, to be awakened by the kisses of some agricultural Prince Charming. If there is a division on this particular Bill, I shall certainly vote against it. I have always disliked this idea of the State guaranteeing loans to particular industries. I attacked it in the Dáil when it came up before, and I am opposed to it still.

Senator Quirke's remarks that, in fact, there was no general opposition to it in the Dáil, could be explained by the circumstances, that the record of the Opposition really prohibited them from taking any strong line on the subject. They introduced a similar Bill and exercised similar powers when in office. In spite of what Senator Quirke said about the results having proved up to now satisfactory in the case of loans—possibly that was because they had not got the same instrument in the way of protective tariffs that the present Minister has—they were absolutely disastrous. I think Senator Quirke is a bold man to say that the results of guaranteeing trade loans by the State up to date have been such as to justify them.

I do not believe the State is equipped for making such guarantees as are permitted. I agree with Senator Johnston that it is an obvious source of possible corruption, public and private. There is no use in Senator Quirke saying that we have got such an admirable Ministry that it is impossible for any one in high places to commit blunders or great errors of judgment, or moral delinquencies, but we cannot reckon on that for all time. We would be unlike every country in Europe if we never had a Minister getting into power who was capable of making great financial blunders, or even if we never got a Minister into power who was capable of being corrupt. This is the kind of Bill that seems to me to open the door to corruption more than most others, and I object to it on that ground, as well as on other grounds. The remarks of Senator Quirke have given a good illustration of the sort of dangers inherent in a policy that includes Bills of this kind. Senator Quirke referred to the suggestion of Senator Johnston that there would be tremendous temptation to the Minister to buttress up a failing industry to which the State had guaranteed a loan, and to give it preferential treatment rather than see that loan go bad. According to Senator Quirke's answer, that is no danger at all in his eyes. In his eyes every industry in the country deserves preferential treatment, if necessary. I think that is an outrageous proposition.

Mr. Quirke

On a point of explanation, I think the Senator is not right in accusing me of saying that every industry is entitled to preferential treatment. I never said that.

Mr. MacDermot

In that case the Senator's arguments had no meaning. The only point in his reply to Senator Johnston's warning, about the danger of buttressing industry, would have been that every industry could be advantageously buttressed. I think it ought to be realised, even by the most ardent protectionist, that it is sometimes for the good of the country that an industry should go to the wall. That fact was not realised by Senator Quirke when rebuking Senator Baxter. There are industries that it is better for the community should go to the wall because they are detracting from public prosperity instead of contributing to it. I think the whole ideology of our industrial policy would be purified and improved if we had not got into the habit of talking as if it was a sacrilege to say that the country would be better off without any industry rather than that any industry, however uneconomic, might exist. Senator Quirke said the people in Clonmel would fight for the boot factory even if the boots made there were bad. I have no doubt they would. Financial vested interests and local patriotism would fight violently in defence of any factory that might exist. That very fact ought to make us more cautious of what we do. Once you start an industry, however rotten, it is definitely difficult to get rid of it.

Mr. Quirke

Does the Senator think that a bad thing?

Mr. MacDermot

I think it is a waste of breath to discuss whether it is good or bad. It is inevitable. People will wish local industry to continue. That is human nature. I merely say the fact that they do is not a sound reason why, from the point of view of the State, they should continue. An industry that is uneconomic and that impoverishes rather than enriches the community ought to go. I am in general sympathy with the policy of the Minister for Industry and Commerce, and I do not want him to go out of action for ten years, but I dislike this particular Bill. I do not think anything has been said in its favour that goes anywhere near answering the objections raised by the Banking Commission, and the objections raised to-day by Senator Johnston.

Sir John Keane

I do not propose to range over the whole Government economic policy. It would be impossible to do so on this measure, but I feel the admiration of it by the Minister to be rather an exaggeration. I have an admiration for the Minister's optimism because even though the portents are alarming the Minister tells us everything is quite happy. With regard to this measure, I do not at all like the way the Government is tied to any industry, or the way in which Government prestige and policy is dependent on this, as there is a temptation, undoubtedly, to use Government powers to foster and buttress industry. I was told once that I was out of date on economics, and that this policy is perfectly right. On the question of the dangers of this Bill, Senator Johnston referred to the danger of monopoly. I do not feel that that is such a danger. I feel that there is a great danger of the Minister using an allied institution, the Industrial Credit Corporation, to come to the rescue of the trade loan guarantee. I should like an assurance from the Minister, if possible, that such was not the intention. We all know that legally the corporation may be independent but, in its nature it is controlled by the Government. The Government holds over 90 per cent. of the capital, and I feel there is a great danger there, that to save loans under guarantee, the Government may call in a body like that. There is another danger, and the Minister can say to what extent he is taking advantage of it. That is the power to give a trade loan guarantee either without or against the advice of the advisory committee. Under the Bill he can act independently of the advisory committee. I do not know if he has any intention of doing so, but he can give loans against the advice of the advisory body. One other matter was discussed at considerable length on this Bill. I refer to the Government policy with regard to trade loans in the building industry. I feel that there is a great danger of helping the building industry with credits, apart altogether from the power of the public to purchase houses when built. The whole thing is interlocked and cannot be considered independently. There is considerable danger in using the machinery of the Bill to encourage the building of houses when there is no prospect of a sale. I read the debate in the Dáil, and while I was not quite clear as to the Minister's attitude, I think he changed it during the progress of the debate. The Minister will correct me if I am wrong. I understand that at one time it was stated that this Bill was to help building societies. If I understand the object of building societies, their main purpose is to finance the general public who are about to purchase houses. If this Bill is to be used to encourage housing, I feel that it disregards altogether that aspect of purchase. Merely to build houses with no prospect of selling them is unsound and dangerous. I may be wrong about that, but that was my interpretation of the debate in the Dáil.

Mr. O'Donovan

I just wish to intervene for a few moments in this debate, and again, unfortunately, it is the remarks of Senator Baxter that bring me to my feet. I feel that whenever the Senator speaks, either on agriculture or industry, it is a case of all being yellow to the jaundiced eye. In this case, it would appear that everything is yellow save the Minister himself. The Senator tries, by his praise of the Minister while he is here, to hit as hard as he can in what he says about other matters; but he then comes on to the question of agriculture and refers to the Minister for Agriculture as not doing certain things for the farmers. He says that when the Minister for Agriculture is not here. I presume that, if the Minister for Agriculture were here, the Senator would say that he was a very nice gentleman, although at the same time everything he was doing was all wrong, when the Minister is not here. I wish to put one question to Senator Baxter and to the other economist who has spoken, Senator Johnston: Has not the Government, through the Minister for Agriculture, given the farmers a monopoly in the butter trade? Have they not been given a monopoly in the egg trade and in the bacon trade—notwithstanding the aside of Senator Johnston, that the bacon curers had made £300,000 excess profits from the consumers? The fact remains that the Government, through the Minister for Agriculture, have given to the farmers and the agriculturists of this country monopolies of the butter, eggs, bacon and meat trades of this country, and that is a flat contradiction of the assertions made by Senators Baxter and Johnston. That is my main purpose for intervening in this debate. However, apart from that, I should like to say, as the Minister for Agriculture is not here and the Minister for Industry and Commerce is here, that the régime of the Minister for Agriculture has been a far more difficult one than that of the Minister for Industry and Commerce. When we came into office, we were so derelict of industries, and our people were appealing so much for the support of Irish goods and the support of Irish industries to produce those goods that, in my opinion, the problem of the Minister for Industry and Commerce, hard though it was, was a much easier problem to face than that of the Minister for Agriculture who, when we took office, had not merely to tear down a false economy but to fight an economic war with an enemy that was trying to destroy our industries here

Mr. Hayes

To destroy the cattle trade.

Mr. Baxter

Try to keep the Senator away from the economic war for his own sake.

Mr. O'Donovan

The Minister for Agriculture had to fight a foreign country that was trying to starve us here, and he had to try to build up an agricultural economy which, certainly, is better than your economy of grass. That is what I have to say.

Mr. Baxter

Why is tillage decreasing?

Professor Johnston

Is grass a weed, or what is it?

Mr. O'Donovan

Well, I am afraid there are weeds in more places than in the fields.

Mr. Douglas

I do not wish to take up the time of the House. I am sorry I did not hear the speech of Senator Johnston. I want to say that I do not think that anyone is enamoured—probably the Minister himself is not enamoured either—with the system of trade loans. However, as I see it, that policy has been continued in this country for a considerable number of years. Then the Bill lapsed, but it gave certain limited facilities—on pretty drastic conditions I must admit—but nevertheless they have proved to be of great value in connection with certain industries, and I believe that it was absolutely essential for the Government to continue this system at the present stage, although I do not believe it would be a permanently satisfactory arrangement. While you have an existing industry which has a substantial capital and in which extension is desirable, but which possibly is not showing such profits as would make it possible to float the matter as a public issue, this method has provided a way by which such an industry can be extended, and there are many cases in which such a procedure can be justified. There are many cases of losses which can be justified, but you can also point to a number of cases of businesses paying regularly but which could not get further capital to extend their business.

Some people seem to think that this is a method of financing industry. I submit that it is not, and that it never could be, but I also submit that as a method of providing short-time and temporary assistance to an industry it is a thing that should be continued until some other method may be found. Where the money cannot be found from the banks or by a public issue, and provided that the loan has a proper relationship to the capital already in the industry and to the capacity of the people to pay back the loan, and that there is a proper reserve to meet commitments, I think that there is a number of cases where this would be very useful, and I would be very sorry if the Minister decided to drop it altogether.

Seanad Éireann debate - Wednesday, 8 Mar 1939

Trade Loans (Guarantee) Bill, 1938—Second Stage.

Mr. Hayes

Seanad Éireann debate -
Wednesday, 8 Mar 1939