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Seanad Éireann debate -
Thursday, 8 Oct 1942

Vol. 26 No. 27

Central Bank Bill, 1942—Committee (Resumed).

Debate resumed on amendment No. 4.

When the Seanad adjourned last evening we had had speeches from both the right and the left, and, although one might have expected some more help from some of the people on the right, I confess I was disappointed in finding so little difference between the points of view expressed by Senators like Senator O Buachalla and Senator Sir John Keane. My amendment was put down because I honestly believe that this central banking institution, which is to be brought into existence through the operation of the measure which is going through the House, cannot with the machinery which we are inserting in this Bill do the things which we want to have done in this country. I am not attacking the joint stock banks or their policy in the past in any vicious sort of way, but I join issue with all those who acclaim the efforts of the joint stock banks in the matter of giving us the essential financial machinery requisite to build up life here in the way we want to have it. Senator O Buachalla said that the joint stock banks had given great assistance to agriculture in the past, or something equivalent to that; I do not want to misquote him. Since this State was set up there has been considerable dissatisfaction because of the difficulties agriculture has been experiencing in having provision made by way of capital for necessary undertakings. That dissatisfaction with our financial institutions was first expressed in 1926 when the Oireachtas in those days put through the Agricultural Credit Corporation Act. If the existing institutions were doing all that was necessary for them to do, there would never have been any necessity to bring in any such measure as that.

One would think from listening to Senator Sir John Keane that the joint stock banks were the last word so far as agriculture was concerned. There has been grave disappointment over a period of years with the operations of the joint stock banks and, as I say, that first expressed itself in the Act I have referred to. I do not know how much was hoped for from that Act, but it was early realised that the whole basis on which this new institution was to function was not satisfactory, that the financing of the institution itself was not what it ought to have been if the maximum amount of good was to be done for agriculture. It is past history now, but I think it is not revealing any secret to say that at the first meeting of the board of directors of the Agricultural Credit Corporation the first thing they did was to go in a body to the then Minister for Finance to express to him their considered opinion that the financing of the Agricultural Credit Corporation made it difficult, if not impossible, to do for agriculture what ought to be done for agriculture. I was on the board then. That is past history, but it is a fact. There has been no great improvement since.

While the corporation has undoubtedly convenienced a great many borrowers within the State over a period of years, the whole structure on which the institution is founded and the difficulties which it experiences in getting money at the right price make it impossible for the corporation to do for agriculture what must be done for it if it is to be put on a sound basis. All through the years why do we hear people declaiming against the banks? I am not one who will take part in that campaign. In fact I feel, and people like me feel, that our greatest friends are the commercial banking institutions, but with many with whom I discussed the question, the feeling is that unless there is more consideration, more understanding and a more forward policy on the part of the commercial banking institutions, a number of people who are in the middle of the road to-day, are going to be driven to extreme steps. I do not like extreme steps. I do not believe in them. In the last analysis, no matter where we look for a test of extreme measures, I do not think anybody could be satisfied with the fruit garnered from them.

The attitude of the commercial banks in the past, to say the least of it, has not been as helpful as it could have been. The directors of our commercial banking institutions would be in a much happier frame of mind to-day if they had taken the advice offered to them for a number of years, and had put more money into the soil of Ireland, into all sorts of equipment for Irish farms and into farm buildings. Their money would be much safer than it is to-day. I am convinced that it would be much safer, because the truth is that if agriculture here is strong, healthy and vigorous, to that extent will our banking institutions be strong, vigorous and helpful. I do not understand why the directors of commercial banking institutions cannot see the position from that angle. Perhaps it is because they prefer to look to the outside world. I feel that the methods to be employed in the future to get money for national undertakings are roundabout methods, and are not going to be efficient for the undertakings that we hope to see brought into existence. The methods proposed in this Bill will, I believe, be thoroughly unsound. No matter what way we approach it the central bank cannot issue credit. Anything procured must be procured through the commercial banks.

I have here the 15th annual report of the Electricity Supply Board, of which all members of the Oireachtas get a copy. I do not know if many Senators examine it, even with superficial curiosity. It is a very interesting volume. In the accounts for 1941-42 the total amount of interest payable to the Minister for Finance on loans, loan stock, acquired undertakings and other interests, comes to £792,300. That national undertaking has to find practically £800,000 for interest. Where does it find the money? Naturally the people who buy electricity pay for everything, for fuel, for the engines, for the staffs as well as the interest. The total receipts from the sale of electricity amounted in that year to £2,182,000, which the consumers of electricity had to pay, and of that, £800,000 was interest on money borrowed for the carrying out of that national undertaking. In other words, one-third of the total expenditure in that year was by way of interest or, to put it in another way, the consumers of electricity are, for four months of the year, paying interest on borrowed money. If the interest was cut by half, and brought down to 2½ per cent., it would represent one-sixth of the expenditure on the millions of units consumed. It would mean if the rate of interest was reduced that, for two months of the year, each consumer could have electricity for nothing. I am convinced that the policy proposed here is an unsound one. It is retarding national development, and is the kind of policy enunciated by Senator Sir John Keane, and the one, I am afraid, that is going to be enunciated by the board when the central bank is set going. If that is so, and if national undertakings are only possible in the future in a roundabout way by getting money from the joint stock banks at rates of interest that will have to be levied on the community, then I say that you are damning the possibility of national undertakings being started.

I do not know if the Senator is suggesting that the joint stock banks were responsible for that interest which is payable by the Electricity Supply Board. Is that so?

No. The whole conception here is that you cannot get the money unless somebody pays an exorbitant price for it. You have that embodied in the report. It is the same idea as was enunciated when Senator Sir John Keane told us about the banks advancing money to creditworthy farmers. It is the same idea we have permeating our whole approach to every new venture in this country— where is the money to come from, and is there a possibility of making a profit? When it is desirable to get some national undertaking under way, the money can be provided through the commercial banks, but they will ask what interest they are to get, and what profit there is to be made out of it. On that basis of profit, national undertakings in the future would be damned before they were attempted. The whole approach to the solution of a number of difficult problems will be stultified by adopting such methods in the financing of schemes like this.

Senator McEllin is not in the House at the moment. He reiterated yesterday something he said before—the unwisdom of giving money too freely to farmers. He warned us of the dangers of inflation, but he misrepresented the situation. When these matters are being dealt with, the full case should be stated. I do not know what Senator Sir John Keane will say about the policy of the banks, or whether he stands—as Governor of the Bank of Ireland and as one associated with banking institutions for a considerable period—for the policy of handing out money rather recklessly to farmers without considering whether or not they could pay it back. The truth about it is that the banks spread themselves out: in the period of inflation they were bulging, so to speak, with paper money and wanted to have it translated into solid things, in so far as they could, and it was easy to get money. I do not know what sort of conscience these people have about getting it back.

It is a strange policy to pursue—to hand out money without calculating what the conditions might be like when the money was being sought again. In this period of inflation farmers got money easily and freely. Then we reached the point where the farmers experienced the deflationary period after the war; but, with a cold, callous outlook, the banking institutions went after their "pound of flesh." It was the people in charge who wanted to revalue money in terms of goods, making it impossible for farmers and producers everywhere to repay the banks. Therefore, I want to put it on record that Senator McEllin's presentation of that picture was not quite correct.

Senator Keane the other evening gave the House his picture of the situation, and I think he suggested that the banks only give out in loans the equivalent of their deposits. I hope I am not quoting him incorrectly now. A statement like that leaves the ordinary man under the impression that banks get a certain amount of money in and give out the equivalent, and that then they have nothing left, that all is gone and there is not 1d. in the vaults, and that they must wait until more deposits come in before they can lend any more. In a Second Reading speech, the Senator read from the balance sheet of one of our banks, pointing out that the assets consisted of £1,723,258 or 13.5 per cent., in cash; the investments represented £6,764,297 and there was a small amount in other securities. Bills and advances amounted to £5,279,753, which represented 41.5 per cent, of its assets and advances. I wonder if the Senator suggests that investments are not loans?

They are not loans in that sense.

Are they an issue of credit? I would like to have this more fully examined, as the impression the House got from the presentation of the case by Senator Sir John Keane is not in keeping with the facts. If a few of us decide to start a bank and get a capital of £10,000, we keep 10 per cent. in the bank and employ the remainder in the usual manner in which banks employ it. The liabilities are put down at £10,000 and the assets will be £1,000 in cash, £4,000 in advances and Government securities to the extent of £5,000. Now, if I happened to have £10,000 myself and made a loan of £10,000 I would have nothing left; but it is not so with a bank. After making its advances of £4,000 and buying Government securities of £5,000, it still has assets of £10,000. What happens then? In the ordinary course of business, the £4,000 in advances and the £5,000 in Government securities create a certain position within the community, and a considerable amount of the £4,000 in advances will come back to our little banking institutions. The £5,000 spent in the purchase of Government securities will pass out into the hands of workers and amongst the community, and a share of this will come back to the banks also. The net result is that £8,000 will return to the banking institution. That will bring the £10,000 in assets up to £18,000.

Where does it stop?

The Senator may examine and study this and then come back to contradict it.

They have £18,000 of liabilities, too.

They have, of course. I say £8,000 will return to the bank. Then they must bring the cash up to 10 per cent. on £18,000, that is, to £1,800. Then they can create further cash and investments, just as they did with the original £10,000. The position then is that there is capital, £10,000, and on deposit and current account balances, £8,000, making liabilities £18,000; but on the asset side there is cash, £1,800; advances, £8,000; and Government securities, £8,200; making a total of £18,000. A further increase will be apparent in the resources when the advances in Government securities are available for further investment or advance, as the case may be. That is a somewhat different picture from that which was presented by Senator Sir John Keane, but I suggest that it is the true situation and that it is a true picture of the fashion in which our commercial banking institutions managed their affairs.

Now, I put that to the Senator for examination, and I want to say finally, with regard to these amendments—personally, I would prefer my own amendment to that advanced by the Labour Party although, in principle, the idea is the same—that I cannot be convinced that the Minister's method, as it is embodied in the Bill, is a method that ought to be employed. It is a roundabout, faulty, and slow way, and I cannot understand the Minister's hesitation and lack of faith in himself. I do not think that in this country we are going to act so rashly as to turn out a flood of credit that is going to give us such an inflationary trend that all the savings of the people will be brought down to the point where nobody will ever save again. It has been my experience that if you are thrifty, you are thrifty by nature, and if you are not thrifty by nature, you will not be thrifty. If you are tidy by nature, you will be tidy. That has been my experience, although I realise that some people would have to be driven to work. That is the reason why I think that our people will continue to save, and I want to see them do so, but I want to point out that there is no possibility of our people being able to save unless they are first able to get earnings here in this country—not the earnings that the British people, in a time of war, are prepared to pass over to them, but the earnings of the people here, for the goods they produce themselves.

I think that, by a wise, cautious and careful administration of our own internal affairs, we ought to be able to arrive at some way of determining our general spending policy—what we ought to spend—such a policy as would occupy our people here at home, who are not occupied at the moment and who, apparently, cannot be occupied except through a change of policy. I believe that if our Minister took the powers that we are urging him to take, the central bank would be able to achieve these things; otherwise, it will only mean a slowing up of all progress. I believe also that a great deal of the mentality which is going to dominate the policy of the central bank has been expressed by Senator Sir John Keane, and I am afraid that the strength of mind and the determination of the directors who will go there from our commercial banks will lead to a "go-slow" policy. I fear that, as Senator O Buachalla has said, if you have worth-while schemes and go looking for funds to the central bank, they will hum and haw, and that, just as in the case of the farmer who goes to a bank looking for a loan, they will regard these schemes as unsound. We may be told that that is a policy that will be terminated as soon as the war is over, but I am afraid that the whole thing will be something like the Atlantic Charter, and that the net result will be that nothing will be done. I think the Minister's way is not the best way, and that now is the time—as, I think, we are being challenged by the conditions outside—to do something original: not anything rash, but something that, it seems to me, would be necessary for our community, and make some change which the collective interests of our community demand. Personally, I believe that if the Minister does not do it now, he is missing his chance.

This has been an interesting debate from some points of view, Sir. I did not ask your permission, Sir, to intervene earlier, because I was anxious to wait and hear all that the members of the Seanad might have to say by way of criticism or advice to me, or what suggestions they would offer, as I had requested them, so as to make this Bill a more useful instrument for the welfare of the country, and particularly the poor of the country, in the time to come. In the Dáil there was a very long debate on this same section—I think we might call it a marathon debate. Here, in this House—probably owing to the restrictions of time—the debate has not been, proportionately, so long. Senators will remember that on the winding-up of the Second Reading debate here I asked—and I asked it with all sincerity—that Senators who were critical of this Bill—and principally the Labour Party critics—would bend their minds towards putting in amendments that might help to make it a better Bill, so as to implement or enable us to implement, the ideas and ideals that they were putting forward. This, I suppose, is one of the answers to that challenge. It is a similar amendment to some amendments that were put down on the Committee Stage in the Dáil. The wording of the amendment is there, and each and everyone of us can try to make out for ourselves what it implies and means, but we have got little or no help from the proposer of the amendment, or from the various speakers on the Labour Benches, to tell us what it means. I was grievously disappointed that the proposer of the amendment, who talked for a very long time, did not produce one solitary argument in favour of the amendment. He read reams of quotations, going back over a long period of history. He did not even criticise the quotations—

I did not get the chance.

——although it was not for want of time, and the Chair, with all respect, did not intervene until it was obvious that he had sensed the impatience of the House generally.

Does the Minister mean the proposer of the amendment or the Chairman?

I am referring to the Senator, who, I take it, was the spokesman appointed with regard to this amendment, which, we are given to understand, is going to revolutionise the whole country and make everybody in it healthy, wealthy and happy for evermore. We know the talk that has been coming from the Labour Party during the last few months, and is that an example of the statements, and the logic behind these statements——

I suggest we deal with the amendment to the Central Bank Bill which is before the House.

——from this body that proposes to form a Government, if you please, at the next general election?

What is before the House at the moment?

The Minister is dealing with the amendment.

Such an incompetent, inefficient, ignorant presentation I have not heard in Dáil or Seanad for a long time. I wanted, and I asked for, helpful amendments. This amendment, I am sure, is sincerely intended to help, but where was the help behind the speech that was offered in proposing the amendment? There was not a solitary attempt at an argument behind it. I think there is not a Senator but agrees with that— not one. The Labour Party themselves —colleagues of Senator Hogan—must have felt humiliated that that is the best their spokesman could do. At least, I believe that some of them felt it at any rate.

I would like all Parties in this House, including the Labour Party, to rise to their opportunities. I would like the House to be worthy of itself. The speech of Senator Hogan was a humiliating presentation. We are all interested in the welfare of this country. Everybody, in every part of the House, is just as much interested in uplifting the poor as is the Labour Party or any spokesman of the Labour Party. We have all done our share, critical of each other as we may be in details as to what has been done. I would like to do better. I would like personally, as a Minister, to be helped to do better. We have done a lot. We have done a great deal on the lines advocated even by the Labour members who have spoken on this Central Bank Bill in the Dáil and by some of them who have spoken in the Seanad. But there was not a solitary suggestion or argument backing up this proposition put in by the Labour Senators that would help us to go in the direction in which they want us to go at a more rapid pace than we have been going. I think they would deny that we had gone in that direction—perhaps some of them would—but I maintain that we have and they want us to go at a much more rapid rate.

I object to the two amendments we are discussing, firstly because I say it is not the job of the central bank to do what the Government should do. There is responsibility for the welfare of the community on the Government. The central bank's job is to safeguard the monetary unit and the currency in the country. That bank is not an organisation for social reform. There is the primary difference—the fundamental difference—between my conception of what the bank is being founded for and that of the Labour Party. You have the Government there to do these things and the Government to blame, the Government to prod, if you feel they are not going fast enough, and the Government responsible directly to the Oireachtas. Why not get after the Government? There is this foolish notion in the minds of many people in recent times—the last generation or so—that by a twist of the hand, by monetary manipulation, credit can be produced in superabundance to cure all the social ills that countries suffer from—poverty, unemployment, destitution. That is not the job of a central bank anywhere. Governments are there to take the responsibility and to provide the cash. The central bank ought to be there to protect the unit that is used for implementing all these purposes and, if you have not some body of that kind there, your machinery, in modern times, is not complete and is much more liable to disturbance from outside —sometimes from inside too—than if you have that piece of machinery prudently and sensibly controlled and directed.

I have some friends of my own who have ideas similar to those expressed here by Labour people and others not confined to the Labour Party, about what can be done by monetary manipulation. I have said here and I repeat that even the most ultra-liberal central banking policy will not of itself dispel unemployment. It will not remove economic depression or poverty. Some people fondly imagine that a central bank can with safety provide superabundant funds for social schemes of all kinds. They are wrong. They have a false idea of what a central bank is and what its purposes are. No comprehensive solution of social problems can be expected from monetary manipulation—I have said that a couple of times before and I think it is necessary to repeat it. We would not bother to set up central banking if we did not believe that it has a useful function and can make a contribution, a good contribution, towards solving the monetary aspects of these problems in a way suited to our national economy. The mistake is being made —and perhaps some will continue to make it—of expecting that central banking can of itself find a solution for these problems and create for us an economic Utopia. The sooner people disabuse themselves of that notion the better and the sooner they will get to work to try to find a real solution for the social problems with which this country, like many others, is faced.

Many thing were said in this debate, Sir, that I would like to comment upon but I have to bear in mind your kindly suggestion of last night that we should be brief. I have been interested in this problem of central banking for a long time. When I was a lot younger I, perhaps, might have been styled a monetary reformer. I have reformed myself in that direction by hard and bitter experience. I am a reformer even now and it is because I am that this central bank as it is is here. I was a reformer when I had the honour of first being nominated a Minister by the then President of the Executive Council in 1932, and it is because I was a reformer and belonged to a Party of reformers—of colleagues who were enthusiastic for reform—that we had planned schemes to provide for social reform and to provide work for our people. We were not long in existence when we brought in our Housing Bill which was the most beneficent social reform put in operation in this country in its history. There was a plan there and there was money there, despite what Senator Hogan said—that there were occasions when there was plenty of schemes and no credit and that now there is plenty of credit and no schemes.

Both schemes and credits were there. We did not hesitate to ask for all the money we wanted to build houses. We were only stopped in recent times in building houses because the material was not available. There is no absence either of plan or credit to-day. There was not at any time, since this Government took over control, absence of credit. On the Second Reading, I mentioned that, in less than ten years, we raised loans amounting to £48,000,000. That is a huge sum. Where was the shortage of credit there? The sum of £48,000,000 was raised and spent with the fundamental idea of uplifting the people. Social reform and the betterment of the people in general was not alone the motto but the practice. There was no absence of credit. The total sum raised in long-term loans was £38,000,000—in 1933, £6,000,000; in 1935, £7,000,000; in 1938, £10,000,000; in 1939, £7,000,000; in 1941, £8,000,000. In total that is a big sum. Then we are told that there was no plan and that there was no credit. How can people get up barefacedly and talk like that to a House such as this which knows the facts? They must be talking with their tongues in their cheeks and trying to fool people. They will not get away with it, so far as I am concerned.

You are doing very well.

I know I am. I have the facts to support me and I have 100,000 houses behind me. These were given to the people out of the cash provided from the savings of the people and for every £1 contributed good value was given. That is not plan but performance. What we have done already, we can do again when materials are available. We are told by Senator Hogan, though it has not any relevance that I can see to the matter under discussion, that credit will be attended to by an authority resident outside the State. That is not true. That is all one can say about it. No authority outside this State controls its currency or credit. Why make foolish statements of that kind? Again, the Senator says that control of currency resides outside this State. I can only give that the flattest contradiction. It is not true. We are subject to influence from outside in financial and economic affairs, but where is the country which is not? Take the United States, Brazil, Norway, or Sweden, or any other widely-separated countries. Where is the country amongst them which is not subject in some way or other to economic and financial influences from events that may have taken place thousands of miles away? If a financial crisis occurs in London its reactions are felt wherever there are people congregated in States. If a crisis occurs to-day in London or next week in New York or Brazil, no country can escape its influence. I mention Brazil because it is a place where there are very valuable raw materials of all kinds.

That is very appropriate because we are near Hallowe'en. These materials——

The nuts.

There are a few of them here without going to Brazil. If there was some crisis—for instance, a Labour crisis—in the countries where these raw materials are found and the materials were not available, it would, in normal times, have an effect on the money market and the reactions would be felt, for instance, in London. Stocks and shares would fall or rise as the case might be. When money is tight, the effect is felt from the Arctic coast to South America, passing by Ireland on the way. I say this because I do not want to be misrepresented as maintaining that no influence of any kind outside this country is likely to affect us. That would be a foolish proposition for me to offer to this House, consisting as it does, in general, of sensible men. We are subject to such financial and economic influences. If Senator Hogan means that we are subject to influences of that kind from outside, I agree with him but, when he categorically states that our credit will be attended to by an authority outside this State and that control of currency resides outside the State, I say that the statements are not true. I agree with Senator Buckley when he says that the commercial banks gave help to agriculture. I do not think that Senator Baxter can deny that. A great deal of our industry is run on overdrafts. So is a great part of the commercial business of the country. Agriculturists are more careful than industrialists. They do not go in for overdrafts to the same extent that industrialists and commercial people do.

They would not get them.

They go in for them but they come out without them.

Perhaps they would not get them to the same extent as the others, but what Senator Keane said in reply to Senator Baxter last night about the absence of certain agricultural machinery in Cavan cannot be denied. Cavan has some of the most thrifty people in the country. I heard a distinguished ecclesiastic speak about them a couple of Sundays ago. It would seem as if the people of that diocese were regarded in high ecclesiastical places as being rather Aberdonian in character. There is plenty of money available. If, for example, people in Senator Baxter's district want to buy an extra binder and to invest their money in it, if they thought it a safe proposition to do so, they would not be long about producing the cash from their own resources.

My statement was an indication of the problem through the country in general of there being a deficiency everywhere.

I am rather doubtful of that.

The Minister for Finance knows about other people's money.

I do. I am dealing with other people's money, and it is a tough job to hold other people's money, because there are so many who think that it ought to be given away freely for all sorts of hare-brained schemes. On the whole, our agriculturists have not been badly served by the commercial banks. That has been my personal experience. I do not claim to know as much about agriculture as Senator Baxter and other Senators. I would say that the banks were foolish during the last war when they handed out money rather freely. If during this war farmers—probably not the same farmers—found the banks acting as freely in giving out cash, plenty of them would be got to take it, and chance the consequences hereafter.

A big change in opinion has taken place with regard to the whole question of credit and finance since, let us say, the last war. There has been a fundamental change. I do not know what is responsible for it. I think there is something in the references that Senator Douglas made, in the course of the debate, to the Papal Encyclicals: that they were probably produced because of the need of some clear exposition of what Catholic teaching and Catholic philosophy was with regard to this question of finance and social affairs in general. The Encyclicals probably encouraged the development of current thought on credit and credit control. It is probable that they made the ideas of certain monetary reformers develop more rapidly, and certain thoughts to be engendered at a more rapid rate than might otherwise have been the case.

I do not think the Minister should attribute all these things to the Papal Encyclicals. I think, and I imagine the Minister will agree with me, that that development was largely due to people just taking bits out of them to suit the arguments they wanted to make. I could give dozens of cases where they carefully omitted other bits that they did not like.

The Senator is quite right. I was about to point out that these Encyclicals were very carefully thought out and carefully written, but when people take out sentences, sometimes out of their context, and use them, you can get extraordinary notions sometimes attributed to the Papal Encyclicals. But at any rate they were responsible for encouraging a great deal of thought and discussion in all sorts of places, responsible and irresponsible, on the question of credit and credit control. These Encyclicals, when used, were not often fully used, the quotations fully implemented, or the ideas behind them, often digested and understood. I think that is true, to an extent, of some of the speakers I have listened to here, particularly those on the Labour Benches. They have got a hold of ideas, good in themselves, but they have not understood them. Maybe it is that they have not taken time to do so, but, so far as I have been able to judge from their speeches, they have not digested these ideas or these thoughts. It would be well for them, and maybe good for the country, if they would give a little more time to studying more deeply the propositions enunciated there with regard to social reform and monetary reform. If ever they get the responsibility of office, I hope it will not be until they have had whatever time is necessary—it may be a long time—to enable them to digest, understand and later develop the ideas I refer to.

The Minister has not told us when the election is to be.

That comes under another amendment.

There are 40 odd amendments still to be disposed of. If the Senator feels inclined he can raise that question on each one of them, and I can tell him that I will give him his answer. As I have said, there have been big changes. We here are making changes in the central bank. We are going slowly. Senator Baxter complains that we are going too slowly, but in my opinion, slow and sure in financial matters is a display of wisdom. As I have said, we have progressed considerably in the direction that Senator Baxter and his helpers on the Labour Benches desire us to go, judging by the speeches we have listened to. We have not gone at as rapid a rate as they would wish. Senator Baxter talked about afforestation. We have made progress in afforestation. In 1936 we had 59,500 acres of State-owned woods and plantations, and 94,000 acres in 1940. That is a more than 50 per cent. increase in a few years. As Minister for Finance, I believe that a long-sighted policy on afforestation is good and should be encouraged.

We in this generation will not reap the benefit of it to any extent, except that we will give employment at an increasing rate; but every 1/2d. that the Minister for Lands asked for the purposes of afforestation development has been given to him. He has been encouraged by the Government to go as fast as he reasonably can and he has assured the Government that he can go at no more rapid rate. Seeds and plants have, among other things, to be provided and as fast as he can go he is encouraged to go. If Senator Baxter were there to-morrow and were to say: "I have a plan and I want you to give me an advance for afforestation purposes; give me £500,000 this year and I will use it usefully", I would say: "All right, I will provide the £500,000." I have said that to the Minister for Lands.

I should like to get it at 3 per cent. or 4 per cent.—that is the important thing.

We have plans for afforestation, as well as other things. If that sensible man—as I regard him, at any rate—Senator Foran, that hardheaded, sensible man, were in charge of afforestation, I believe—I was going to say I would bet, but I am not a gambling man and the Senator would catch me out there, because he is more experienced in these matters than I am —he would not be able to go 5 per cent. faster than the present Minister for Lands is going, and is anxious to go, in regard to afforestation.

We have changed, we have developed, as other countries have developed. We have had complaints about the commercial banks being conservative, not giving out money freely, and about money being invested abroad. Twenty years ago, or less, it was very hard to get Irish investors to put money in an Irish industrial concern. It was not the bank directors alone who were responsible, but the people who had the savings and who were free to put their money into Irish industrial development. You could not get them to do it. I had long experience in that matter in the early days of Sinn Féin, with the late Arthur Griffith, doing propaganda work in the newspapers that he edited. He succeeded in getting industrialists—I could mention the names of half a dozen of them, although they are now dead and gone—to agree to found industries. Some of them did establish industries and we did our best in the newspapers to try to get people with money to invest in these industries. You know how we failed.

It took a generation of hard, solid work, propagandising and preaching, to get the mentality of our own people, not the bankers alone—the bankers included, if you like—changed, to get them to have faith in their own country and in their own industrial concerns. We have succeeded in doing that, and this Government has been mainly responsible. The last Government did its share, perhaps more in preaching than in practice; but it did some useful work in practice. Of the £38,000,000 that we raised, a good deal of it has been put directly into the industrial development of the country, into the development of the resources of the country, to prove to the people that they can have faith in their country, and that their money is as safe and as well invested at home as anywhere from China to Peru.

So the banks alone, Senator Baxter, are not to blame in that matter. Our own mentality is as much to blame as the banks. A lot of the banks were not Irish-minded, but British-minded. They have changed, like many of the people of the country, very materially. It was wise for them to change. What is to become, perhaps before the end of the war, of the many millions invested by our people, and by the banks, from China to Peru? We were anxious to bring home a lot of that money. We did bring millions of it in capital goods to this country. If we got the help of Senator Baxter and his colleagues in bringing home more of that money that was invested abroad, we would be better off to-day. We did not get that help; we got their opposition—vigorous opposition, at that. I hope they have learned a lesson.

Amendment put.
The Committee divided: Tá, 7; Níl, 30.

Tá.

  • Baxter, Patrick F.
  • Cummins, William.
  • Doyle, Patrick.
  • Foran, Thomas.
  • Hogan, Patrick.
  • Lynch, Eamonn.
  • O'Connell, Thomas J.

Níl.

  • Blaney, Neal.
  • Byrne, Christopher M.
  • Concannon, Helena.
  • Corkery, Daniel.
  • Douglas, James G.
  • Fitzgerald, Desmond.
  • Goulding, Seán.
  • Hawkins, Frederick.
  • Hayes, Seán.
  • Healy, Denis D.
  • Honan, Thomas V.
  • Johnston, James.
  • Johnston, Joseph.
  • Keane, Sir John.
  • Kehoe, Patrick.
  • Kelly, Peter T.
  • Kennedy, Margaret L.
  • MacCabe, Dominick.
  • McEllin, Seán.
  • Magennis, William.
  • O Buachalla, Liam.
  • O'Donovan, Seán.
  • O'Dwyer, Martin.
  • O Máille, Pádraic.
  • O'Neill, Laurence.
  • Nic Phiarais, Maighréad M.
  • Quirke, William.
  • Robinson, David L.
  • Rowlette, Robert J.
  • Ruane, Thomas.
Tellers:—Tá: Senators Cummins and Hogan; Níl: Senators Goulding and Hawkins.
Amendment declared lost.
Amendment No. 5, by leave, withdrawn.

I move amendment No. 6:—

At the end of the section to add a new sub-section as follows:—

(3) In order to facilitate the bank in the performance of the general functions and duty imposed upon the bank, the Minister shall inform the governor on behalf of the board or the board of such legislative measures as are calculated to affect the bank in the performance of the general functions and duty imposed upon the bank.

I am encouraged in moving this amendment by the very notable speeches which the Minister for Finance has made in this House on subjects which seem eminently sound in relation to this banking question. This matter has already been discussed in the Dáil, but in a somewhat different form, and, in consequence of what was suggested to him there, the Minister made slight alterations in his original draft, but he did not go the whole way. The section as it stands now still leaves the sources of the banks' information entirely at the mercy of whatever Government happens to be in power.

My proposal, if the Minister would accept it, would ensure that the bank got the information it required to carry out its duties, and got it in adequate time to carry them out properly. The functions and duties of the banks, as defined in the Bill, are:

"to take steps to safeguard currency and to ensure the welfare of the people in matters which pertain to the control of credit."

My contention is that the necessary steps to this end cannot be taken by the bank unless they have the fullest information in regard to Government policy, and that no provision is made for that in the Bill. The Minister may say that it is implicit in the Bill, but in these days I do not think that is really good enough.

In paragraph 364 of their report, the Banking Commission dealt with the position of the monetary authority in relation to Government action. Briefly, without reading the whole story—I assure the Minister that I have not taken these words out of their context —the commission said that Government activities represent fully a quarter of the economic activities of a State; that their decisive influence has often been of a disturbing character, and has subjected the currency and credit systems to a strain which the monetary authority cannot be expected to cope with, and for this reason the monetary authority must be fully aware of Government intention, in adequate time to advise, before policy is fully framed. They repeat that as a primary recommendation in paragraph 376.

Across the water, there is a tradition of consultation which is the result of many years' experience and practice, and I hope that, as the years go by, a similar tradition will be built up here, which will be observed by any Government that happens to be in control of the country at the time. In the meantime, until we have attained more stability, I feel that the board of the bank should have the legal right to the means which, as I say, and as the Banking Commission says, are necessary to enable them to carry out the functions with which they are charged. I am not for one moment afraid that the present Minister will keep the bank in the dark, but I want him to look forward and to make such provision now, when he has the chance of doing it, as is humanly possible to ensure that his successors, who may not be of the same way of thinking as he is, do not ignore the bank if it suits their plans to do so.

In this House and elsewhere, ideas have been mooted of such a revolutionary character as to give us cause for very serious alarm in regard to the possibility of what may happen if other people get into power in this country. One Senator aptly described some of those ideas as being of political value to those who know nothing at all, but, when they are put forward by apparently responsible people, they must be definitely regarded as serious, and as an indication of what might be expected under certain circumstances. Senators have only to read some of the amendments put down to this Bill, and the language in which they have been debated, in order to see that there is some force in my contention. It is quite easy to imagine a simple electorate being beguiled by some stupendous bribe into putting the movers of the last amendment into power, giving them a temporary working majority, and then—without any information to the monetary authority, or that information at any rate being given only at the last moment when no possible action could be taken—we might have legislation to alter parity, or to provide cheap money for certain categories of borrowers without making the difference in the rate of interest a general charge on the State, or some similar legislation might easily be brought forward without the bank knowing anything about it, and without regard to the repercussions on the whole financial structure of the State, and particularly on the working classes; they would be the chief sufferers, and not the people who have something to spare.

I gather from what the Minister said in the Dáil that he feels that any mandatory provision in regard to relations between the Government and the bank would have the effect of giving the banks control of national financial policy, but the word which was under discussion there was the word "advise," and, whatever interpretation the Minister may put on that word, I do not think the same objection applies at all to the word "inform," which I have put in here. I hope the Minister will agree to this amendment, or, if he cannot agree to it, that he will put down an amendment of a similar kind on the next stage to meet the proposal which I have made. I should like to impress on the Minister that we are a country which is gradually feeling its way to stability. Many minds still remain in a state of what might be called political development. Time and thought are still required before we reach the standard of stability at which we should aim in matters of this kind, and I think that, in the original setting-up of this central bank, provision should be made definitely to enable the bank to carry out its duties under all circumstances, whatever type of Government happens to be in power.

I should just like to say, without speaking at any length, that I associate myself very fully with the sentiments expressed by Senator The McGillycuddy in regard to this amendment, and I hope the Minister will be able to treat it very sympathetically.

I cannot accept the amendment. Amendments of a somewhat similar character, as the Senator knows, were discussed in the Dáil and some of these I met. I suggest I have met them rather fully in the revised section as it stands—that is, in sub-section (2). The sub-section reads:

"The Minister may, on such occasions as he shall think proper, request the governor on behalf of the board or the board to consult and advise with him in regard to the execution and performance by the bank of the general function and duty imposed on the bank by the foregoing sub-section of this section and the board shall comply with every such request."

My intention is that there should be the closest co-operation between the Government and the central bank but I do not think it necessary that that should be made mandatory by statute. I have the intention that the Minister and the Department of Finance should work in close harmony with the board of the bank and that the advice of the board should be sought as frequently as the Minister thinks necessary. I hope that will be fairly frequently, but to suggest, as the Senator suggests, that the Government should inform the bank of such legislative measures as are calculated to affect the bank in the performance of its general functions, is a proposition that could not be accepted by any Government. If my interpretation of the amendment be correct, it might put the Government in a secondary position. The real Government then would be the governor and the board of the bank.

I do not think the Senator actually intends to go that far but it might end up in that way, that the board of the bank would be encouraged to attempt to dictate to the Government, at any rate on financial matters. I quite agree with those who think that the Government should be advised in matters relating to finance and the whole financial structure of the State, that they should frequently seek advice from that expert body and work in close harmony and co-operation with it. I am sure that neither the mover of the amendment nor Senator Johnston would wish to do anything that might put the board of the central bank in a superior position to the Government and, for that reason, I could not accept the amendment.

I am in sympathy with the idea underlying the amendment and I do not think it is as extreme as the Minister seems to think. In my opinion not only would the Government of the day be very wise indeed to take the advice of the board of the central bank, but if the best work is to be performed by the board of the bank, in the interests of the community as a whole, I believe it will be found highly desirable for the Government, when they have decided on a definite line of policy in regard to financial matters, to give some indication of that policy to the board and to give it a considerable time before any legislation is introduced to implement that policy. I am not, however, of the opinion that the Senator should press the amendment because I do not believe it is possible by any Act of Parliament to force any Minister to give this information to the board if he is not willing to do it. We are not dealing with any particular Minister or any particular Government in this Bill; we are dealing with the Government of the day. I do not think you could have a position in which somebody could sue the Minister and say to him: "You did not tell the board of the bank what your policy was going to be." Nevertheless, if the best results are to be obtained from the bank, I think that the Minister should be advised by the bank and that the Minister in turn should give some indication of his policy to the bank beforehand. At the same time, I do not think you could insert such provision in the Bill except as a pious aspiration and I am not in favour of putting merely pious aspirations in a Bill.

I do not want for a moment to cast any doubt on the Minister's personal intentions in this matter. In fact, I am perfectly certain that he will co-operate with the bank in every possible way but surely he has heard sufficient in the Dáil and here to make him nervous as to what may possibly happen in future? After the war when reconstruction is taking place, there might be quite different forces at work in this country, forces of a less conservative nature than those which guide the Minister at the present time. I cannot quite see the force of the Minister's contention that to give this information on general lines to a body, who can hold their tongues and not take advantage of it, would put the Government in a secondary position vis-á-vis the bank. I regret that the Minister cannot see his way to put something which is stronger than the present section into the Bill. Of course, the Minister seemed very definite on the matter and I am sorry he will not alter his view.

May I, in order to reinforce the view put forward by Senator Douglas, read a quotation on this subject from the Majority Report of the Banking Commission? Here is what they say:—

"No formal constitution of the monetary authority, and no formal relations prescribed between it and the Government, can ensure that this function will be adequately performed if the arrangement is not carried on in a spirit of frank co-operation. It is not sufficient to adopt a statutory obligation for consultation; a tradition of regular consultation should be developed and, on the basis of experience gained, the most suitable forms of consultation must be gradually evolved."

Amendment, by leave, withdrawn.
Question proposed: "That Section 6 stand part of the Bill."

I should like to offer a suggestion for the Minister's consideration. I have never liked these very ambiguous words "the integrity of the currency." If the term means anything, it surely means the stability of the price level. Any deterioration, disintegrity, or whatever may be the opposite to "integrity," of the currency, is expressed in the price level. When we get inflation, the currency expands and prices follow. I would suggest to the Minister that it would be better to substitute some phrase such as "safeguarding the stability of prices." I only make the suggestion so that he might consider the matter before Report Stage.

Question put and agreed to.
SECTION 7.

I move amendment No. 7:—

In paragraph (b), line 43, to delete the words and brackets "(not bearing interest)".

I merely put down this amendment in order to obtain a clarification of the powers of the board of the central bank. As I read the Bill at present, the central bank would not have power to pay any interest on deposits, in any circumstances whatever. I think it desirable that the board should have power at their own discretion to pay interest on deposits, if they thought well to do so. That does not prevent their not paying interest on deposits should they decide to do so, and the normal practice of the central bank would be not to pay interest on deposits.

You approve of that?

I approve of that. I think they should have power in certain circumstances to pay interest on deposits if they felt it was wise to do so. My attention has been drawn to this by a person for whose opinion I have the greatest respect. He points out that in the matter of keeping clearing balances, for example, which he would like to be kept in the central bank, the banks might maintain that at present they are receiving a certain small rate of interest on the clearing balances kept in London or wherever they keep them; that they would lose this interest if they had to transfer them to the central bank and that the central bank should be able to pay at least as attractive a rate on whatever deposits the banks could be induced to keep here as they are now receiving in London, so that the banks will not lose by transferring their clearing balances to the central bank. I think it is in the public interest that it should be made worth the while of the banks to transfer their clearing balances to the central bank.

I put down this amendment because I cannot understand why the central bank ought to be in an inferior position to our other banks. I think it is not proper or fitting or becoming. I think the central bank ought to have the liberty to receive deposits.

Will it not have that power?

I have put down another amendment further on. I want these words eliminated because, like Senator Johnston, I feel that there is a situation at the moment whereby each of our commercial banks, as I understand it, keeps in the Bank of England a deposit account—it is rather difficult to understand it —for the purpose, apparently, of settling not only their external trade balances, but their internal balances one with the other. Whatever may be said about keeping an account in the Bank of England for the purpose of settling trade balances on the other side, it certainly is an extraordinary position that in order that the Bank of Ireland may settle a balance with the Hibernian Bank or the National Bank or another bank here on trade within the country it is necessary to keep that holding in the Bank of England. That is something I do not understand.

There is another point which I regard as of very considerable importance and I should like the Minister to look into it, because it seems to me that the situation as it is at the moment is really indefensible. In 1935 the cash within the State and the cash and money at call elsewhere were 15.4 per cent. of the total deposits. The cash and money at call elsewhere were equal to £20,000,000. That was to meet all the requirements of transactions relating to our external trade when the imports were £37,000,000 and the exports £19,000,000. That was in 1935 when we had actually an unfavourable balance of trade of between £17,000,000 and £18,000,000. At that time the deposits for the purpose of settling our external trade were £20,000,000. In March, 1942, the cash within the State and the cash and money at call elsewhere were equivalent to 22.5 per cent. of the deposits. The cash and money at call outside the State amounted to £35,000,000.

Will the Senator say where he gets these figures?

I think our trade returns will give the figures.

The trade returns will not give the cash balances.

The imports in 1942 were between £29,000,000 and £30,000,000 and our exports were between £31,000,000 and £32,000,000. We had a favourable balance of about £2,250,000 in that period. Against that we are keeping deposits outside of £35,000,000. In 1935, with an unfavourable balance of trade of between £17,000,000 and £18,000,000, our deposits for the purpose apparently of settling our balances were only £20,000,000. I do not think that that makes sense. In order to ensure that we are not holding outside the State a considerable amount of money which really has no function there and in order to encourage, as Senator Johnston says, the banks to withdraw these considerable deposits, I think it is essential to insert a provision that would enable the central bank to take deposits and pay interest. I do not know what interest the banks are getting at present; I am sure it is not very high. But, whatever they are getting, the commercial banks cannot be expected to be at a loss by the withdrawal of these deposits and holding these deposits in this country instead of going outside. Anyhow, I think action ought to be taken which would make it impossible to have our central bank in the position that it cannot receive deposits and that it cannot do for the banks in this country what these banks are getting the Bank of England to do for them. I think the amendment is one which the Minister ought to accept.

I do not intend to say very much on this, but I want to know whether the idea at the back of this section and at the back of these words "not bearing interest" is to be taken as an indication that the central bank, as a central bank, is not expected to go into competition with the ordinary commercial banks. That, as I understand it, is the meaning of the insertion of these words. I think it is most advisable that the central bank should not go into competition with the commercial banks. There is something in what has been said, that commercial banks may lose something during the time their balances may be going through clearance. If they should lose, all one can say is that they will have to take it into account as part of the cost of clearance. If that is the intention at the back of the words "not bearing interest", and if the intention is that the central bank should not go into competition with commercial banks, I fully agree, and would be sorry to see these words eliminated.

I accept the view of Senator Buckley that the central bank should not get into competition with the other banks. As the section stands surely the central bank can only receive deposits from associated banks, and one or two other credit institutions, or public authorities. It cannot accept deposits from the general public. That is left as the sphere of commercial banks. I do not see why it should not be possible to arrange it in such a way that the central bank might pay interest on a limited amount of deposits of commercial banks, but not pay interest on the great bulk of deposits from other sources.

I rather fear that if the power to pay interest on deposits were given to the central bank it might, to a great extent, change the character of the bank. At present, the intention primarily is that it will not be a profit-making institution. My anxiety would be that, as far as the central bank is concerned, the question of profit would never arise, and that the board would devote their whole time, attention, knowledge and experience, to the principle that the bank should, at all times, act in the public interest without any regard to profit consideration. I do not think that anything like the sums that Senator Baxter mentioned would be involved in clearances or in balances kept for clearance. I do not think they would reach anything like the proportion mentioned—say, £5,000,000, certainly not £10,000,000 or £15,000,000. These clearances are relatively a small matter. A small cheque at the end of the day might be sufficient to pay over, from one commercial bank to another, the balance of the account for that particular day. The amount that it might be necessary to keep might be relatively small for any of the banks. For the biggest banks, say the Bank of Ireland, or the National Bank, the proportionate amounts would be bigger than for others.

I wonder would they ever amount to £1,000,000, without mentioning £5,000,000? I do not think they would. I speak subject to correction, but I doubt if the Bank of England pays any interest on balances kept for the Bank of Ireland or for other banks. Some other banks do, because balances are kept by commercial banks in an area where there is a good deal of business. The balances are kept by these banks for clearance purposes and, I understand, some of them pay a small rate of interest. I do not think the Bank of England does. Therefore, the banks would not be in any worse position in transferring bank balances to the Bank of England for clearance purposes. I am anxious that the section dealing with clearances should be used some time or other, after proper consideration by the banks, and that clearance operations might be performed here if the board of the bank thinks it is for the good of Ireland that that should be done. If it would assist in that way I would be happy to consider the proposition but, at the same time, I have to bear in mind that it might change the character of the central bank, to some extent to that of an organisation looking for profit. Therefore, the fundamental idea in my mind would be lost. That is my difficulty. I think Senator Baxter's argument goes by the board, or 90 per cent. of it, as far as clearances are concerned. I do not think the sums are anything like as large as he suggests and, as far as the Bank of England is concerned, I do not think it pays interest.

I agree with the Minister that it would only relate to a very small proportion of the total deposits in the bank. There may not be much in the point, but perhaps the Minister would look into it.

Certainly. The Senator will understand that I am anxious to preserve a certain character in the bank and I think he is with me there.

I feel that the Minister is right in his contention, and that he should not encourage the profit aspect in regard to the central bank. I think the character of the central bank should not have regard to profit in its monetary policy. With regard to the Bank of England, it gives no interest on deposits from the joint stock banks.

No interest?

No. If it does give any interest I think it is confined to other central banks. I am certain it does not give interest on deposits from commercial banks. With regard to Senator Baxter's suggestion that the cash held helps clearances, of course, cash has increased very much in recent years owing to the emergency, and in a time of anxiety, owing to enemy action, money should be more liquid as it might be wanted "at call" more readily. That is the reason the banks have more cash available than they use. It is a loss to them, but it is an obligation they have to the public and they feel it to be their duty to do that.

Amendment, by leave, withdrawn.

I move amendment No. 8:—

In page 5, lines 51 to 54, inclusive, to delete paragraph (d).

As the section stands, it is very peculiar and gives very extensive powers. Sub-section (d) reads:—

"With the consent of the Minister, acquire, hold, or dispose of shares in any international bank formed wholly or mainly by banks which are the principal currency authority in their respective countries."

After the war of 1914-1918, certain influences in the world endeavoured to secure financial control, and the plan decided upon by these international financiers was that banks would be created which, to a great extent, would be entirely outside the control of Parliament, and would be a law unto themselves. The culmination was that of having a bank of international settlement by which they would secure complete control of the finances of the world. This section practically gives power to the Minister to affiliate with a bank of international settlement. It will be noticed that in another amendment an endeavour was made to secure for Parliament control of the activities of the central bank. The world of today is no recommendation for a bank of international settlement, as it cannot be denied that international finance has had, at least, something to do with the wretched carnage that is now taking place. If we are to keep out of this international whirlpool, I consider we would be doing a very good work by agreeing to this proposal. My argument is fortified by a pamphlet published by a distinguished Catholic sociologist, Father Fahy, in which he deals extensively with the question of international finance. The amendment is an attempt to keep us out of the international maelstrom.

I fear if this amendment is accepted it will destroy the possibility of co-operation between the central bank here and central banks in other countries. In order to have any real co-operation it is essential to co-operate with other banks. It would be unwise to preclude the possibility of participating with the work of a bank of international settlement, and I cannot help thinking that that would be the effect if the amendment were accepted.

I do not think we should accept this amendment, as I would not like to see our hands tied in the matter of securing the stability of currencies or the smooth functioning of the monetary and commercial systems of various countries. That is what would happen if this amendment were adopted. What I like about the wording of this sub-section, as it stands, is that this power to acquire, hold, and dispose of shares in any international bank can be exercised only with the consent of the Minister. In other words, the power to take part in any international bank of any kind can be exercised only after receiving the Minister's consent. Therefore, that power resides in Parliament, and that is every safeguard that it will not be abused. I suggest that the amendment be withdrawn.

If there were even the remotest connection between holding shares in the Bank of International Settlements and association with the carnage that is going on in the world to-day, I could understand the amendment. I do not know how the Senator associates these two ideas. We would not be associated with the war or with international finance in the sense the Senator has in mind by being shareholders—to a modest extent or to any extent—in the Bank of International Settlements. Practically all the countries of the world have set up central banks—we are one of the last—and for purely technical reasons this international bank is necessary. Senator Baxter has referred to the transactions that take place between our own commercial banks every afternoon at the Bank of Ireland, when they interchange their cheques and write off balances against one another. This Bank of International Settlements would do work of that kind for us. It is a kind of central bank for all countries.

There are Irishmen in all corners of the globe and we do business with all sorts of places and when we exchange cheques with banks in other countries, this international bank is a convenient place to make weekly or monthly settlements. I assure the Senator that there is no more commitment than that in being associated with it. If it meant any more, if it meant tying us up with the bad name that international finance has often, and perhaps deservedly, got, it would not be in this Bill. It is merely a technical banking institution to enable us to make settlements conveniently from time to time.

Inasmuch as the Minister has said that it acts only as an international clearing house, so to speak, I am not pressing the amendment.

It is also a source of information. The bank collects there—as the League of Nations does for other bodies—statistical information from all over the world and issues it in weekly or monthly bulletins— which I am sure the Labour Party would be happy to have, even now.

Amendment, by leave, withdrawn.

I move amendment No. 9:—

In paragraph (e), line 55, to delete the word "re-discount" and substitute therefor the word "discount"; and to delete all words after the word "authorities" in lines 55-56 to the end of the paragraph.

I want paragraph (e) altered so that it will be possible for the central bank to discount Exchequer bills and bills of local authorities, without making it obligatory that they should have previously been "accepted, discounted or endorsed by an associated bank or any other bank or credit institution carrying on business wholly or partly within the State and which mature in not more than 12 months from their date." I have argued at considerable length along those lines, and do not propose to take up the time of the House now on this paragraph. This is really part of the idea I had in my amendment to the previous section. I am not at all happy that Exchequer bills and bills of local authorities must have the imprimatur of the associated banks before the central bank can accept them. I am urging on the Minister that the central bank itself should be able to discount those bills. If the Exchequer wants credit money to carry on, the whole security of the State—citizens, lands, stock, houses and, apparently £300,000,000 sterling across the water— is behind it. With all this, Exchequer bills can only be rediscounted by the central bank. That is not the way the Minister for Finance should go about it. If our local authorities want funds for worthy purposes, they should not be obliged to find it in this roundabout way.

We argued this question many times in the Dáil. Senator Baxter announced yesterday that he is conservative. I am not—I think not, anyhow. I am anxious to be progressive. If I thought this would be a real help, to make credit—properly—more readily available at a cheaper rate, I certainly would consider it. I have not heard any new argument from Senator Baxter. I heard some in the Dáil and they did not convince me on this matter. I am open to conviction on any section, in order to make the Bill a more useful and more helpful instrument for the State's welfare. If I thought that Senator Baxter's proposal—or the similar one by Senator Johnston later —would help in that direction, I would be happy to consider the matter further.

Surely, the real objection to this amendment is that it would bring the central bank into competition with the other banks and that, consequently, it might destroy the moral influence over the commercial banks which, we hope, the proposed central bank will attain.

What I feel is this: I cannot help feeling that when a local authority, or even the State Exchequer, seeks money from this proposed bank, for whatever the reasons may be, what determines the minds of these bankers as to whether or not you are going to get the money, is the rate of interest that you will pay for it.

Yes, that is an important point.

My whole conception about the kind of things that the local authorities have to do, or that the State, as the representative of the community, has to do, when it comes to a question of finding the money, is that it is all determined by the question as to whether you can pay a profitable rate of interest, according to the minds of the commercial bankers, for the money you are going to employ on the proposed schemes, and, accordingly, your project is prejudiced beforehand because of that fact. For that reason, I think, you are always handicapped. I am not blaming the commercial banks so much, if their theories are correct—that they have got to have certain rates of interest because they are in charge of other people's money, and so on. But that is the position, and, accordingly, I believe that the determinant really is, so far as our commercial banks are concerned, in connection with the provision of money for either local schemes or national schemes, what will be the rates of interest which they will get from the money that they provide, and I say that that will handicap both the local authorities and the national authority. I say that for that reason it ought to be possible for the central bank to discount bills either of the Exchequer or of a local authority, and I would also say, in reply to Senator Johnston, that it would be no harm at all for the central bank to show some leadership in this matter. I have the feeling that if the central bank had the power to do that, you would probably find that the commercial banks would be prepared to take a lower rate of interest than they have been prepared to take in the past. I think it would have the moral effect of inducing them to invest moneys in what Senator O Buachalla called worthwhile schemes in this country.

The Senator speaks of the moral effect, but has he considered the immoral effect in connection with the central bank, which has practically no shareholders and which is a Government institution? Is it fair to bring this bank into competition with the other banks? That is implicit, not only in this amendment, but in a number of other amendments, and I think it is unfair to bring in this competing bank and to allow it to do all the things that are suggested here. I think it would be better to nationalise all the banks, and let there be an end of it.

I think I can say that, long before the first Dáil was in existence, I had to deal with this question of the financing of local authorities. I have always been interested in the question of financing local authorities. I had many a tussle with bankers, in my time, on behalf of the Dublin Corporation. I know that it was, at times, difficult to get money at the rates at which we thought we ought to get it, but I believe that there is no man who has more practical experience, either in this House or the other House, with regard to this question of the financing of local authorities, than I. I know the difficulties, and what we have been up against. Senator Laurence O'Neill was for many years my colleague on the Dublin Corporation, and, in regard to many of these matters, he would have a lot of experience also, but I think that I would have even a longer experience than he. What I want to safeguard is that, in whatever schemes we have for the betterment of our people and our country, we should use, first of all, our own resources.

I hope it will never be necessary that we should have to go to the people and ask them to pay out the last of their own savings, but I think that would be better, in the long run, than running to the central bank every time that we had schemes—whether good schemes or hare-brained schemes—to put forward. I hope that the central bank would not assist in the financing of any hare-brained schemes, but let us suppose that the Government found it difficult to get loans from the people at a rate of interest that they thought satisfactory, and that the schemes were so necessary and so important for the welfare of the community that the money must be got, then I think that the taxpayer ought to pay the difference. In other words, the Oireachtas would pay the difference, and tax the taxpayer for it and let the taxpayer know fully what was being done. If the people of the country felt that these were excellent schemes—let us call them such—and found a difficulty in getting the money to provide for the schemes in the ordinary way, at a sufficiently low rate of interest, then I should say that the Oireachtas should be authorised to pay the difference in the name of the taxpayers for the good of the community as a whole, and I think that that would be a more prudent and wiser way of getting the money. I do not want to stop social reform or to interfere in any way with schemes for the public welfare, whether housing schemes or otherwise, but I do want to say that, in measuring the costs of these schemes, the Oireachtas should be brought up against the hard facts of the necessity of finding finances for these schemes, and that it should not be made too easy to encourage anybody to use methods that, in the end, would not be for the welfare of the community, but would redound to the hurt of the people that they were seeking to serve—the poorer sections of the community.

I thought we had arrived at a stage where, if it was necessary, we could go to the Oireachtas and ask for the difference to be paid. In other words, if the money was necessary for the welfare of the community as a whole, I would not hesitate to go to the Dáil and say that we could not get the money unless we were prepared to pay the difference in the rate of interest —let us say it was 3½ per cent., 4 per cent., or whatever it was. I would be prepared to say that that is too much to ask the local authorities to bear, and ask the Oireachtas to make up the difference and tax the taxpayer, and if the taxpayer wanted these schemes, through his representatives, to be put into operation, he would then know that he was going to have to pay for them.

The Minister said that he had no idea or no desire to prevent social improvement in the country, but he is passing on to the commercial banks the responsibility for preventing it. We believe that through the central bank the sufferings of the great mass of the unemployed and the unfortunate people of the country could be ameliorated. If the central bank was to perform the duty which we believe it could perform, it could prevent what happened actually some 20 years ago in a neighbouring country where the Labour Government at the time set out to introduce extensive measures of social reform and the commercial banks told the Government that they would not advance the money for what they considered to be wild-cat schemes. Now, that Government at that time had no alternative. We believe that our central bank ought to have an alternative to which the Government can resort and say "We want this money at a moderate rate of interest; we want to alleviate the sufferings of our people." Our whole intention is to strengthen the Government, to put an instrument in their hands, an alternative to the commercial banks which, up to now, have shown no great sympathy with the alleviation of the suffering of the general bulk of our community.

May I say one word in reply to that—that my view is that central banks do not exist to finance Governments. Central banks do not exist for that purpose, but to regulate currency and credit, and there is no power on earth to stop a Government getting the money for these desirable social reforms and improvements that the Senator has in mind and that I know he would like to see put into operation as much as I would. If the Government wants to get the money they can get it and they do not need a central bank to get it. We can get all the money we want to-day if we pay for it.

If you pay.

Yes, and if we do not wish to pay a high percentage to the commercial banks, we can come here and ask this Seanad to bear the expense, but it will not stop the schemes—it need not stop the schemes —we can get all the money we want. I do believe that, with the new central bank constituted as it will be by this Bill, we will get a useful and effective instrument to help us in the direction in which the Senator desires to go.

I just want to put one question to the Minister—who regulates the price at which we will get this money?

Up to the present, all questions of that kind have been argued and debated between the Minister for Finance of the day and the representatives of the commercial banks.

Surely, this is an opportunity which we should avail of to upset the arrangement whereby the commercial banks, whose interest is entirely profit, as against the Government whose interest is the amelioration of the sufferings of our people, say: "We have the money, and we will lend it to you at a certain rate of interest", and the Government and the Oireachtas are absolutely powerless.

They are not. I join issue with the Senator there. They are not powerless.

I am glad to know that.

I do think we have to have regard to some of the technical aspects. Of their nature, the financial requirements of local authorities do not lend themselves to short-term borrowing. Short-term borrowing is applicable to certain transactions—which are not those of local authorities—trade bills, for instance, for financing the transit of goods, and, as soon as the goods are sold, and the transaction cleared up, the bill is disposed of.

Local authorities have no business of that kind, and all I can see happening, if the local authorities have power to get bills discounted at the central bank, is that these bills will have to be renewed or else they will have to get funds from the commercial banks in order to meet these bills, and it will bring the central bank totally out of its province into dealing with the renewal of bills which, as the Minister says, is not at all the business of a central bank. That is the business of the commercial banks and commercial banks, undoubtedly, have to help the local authorities to meet these bills. Past experience has shown that it is very undesirable to bring the central bank into that invidious position. Rediscounting is quite another matter because the bank has to meet the bill on maturity and the central bank then knows the measure of its obligations.

Leas-Chathaoirleach

Is the amendment being withdrawn?

No, Sir.

Amendment put and declared lost.

I move amendment No. 10:—

In page 5, lines 59 and 60, to delete the words "and which mature in not more than 12 months from their date".

The particular powers conferred on the bank by this section include power to rediscount Exchequer bills and bills of local authorities provided such bills mature in not more than 12 months from their date. The amendment is a very minor one. It merely proposes to strike out the reference to the date of maturity. There does not seem to be any good reason why there should be a restriction by statute upon the central bank to rediscount bills. Let the central bank see the bills and then, if they wish, let them rediscount them or refuse to rediscount them. At the present time the Minister knows that public authorities are indulging in such things as turf schemes and so on and if a commercial bank discounts a bill for a public authority that bill cannot be taken to the central bank to be rediscounted——

Public authorities have no power to have bills at all at present. They have no power to have a bill with any bank anywhere at present.

But a short bill could give them the power.

They have not got it at present, and there is no bill of a local authority in any bank at present.

No bill of a public authority for discount in any commercial bank?

Public authorities have no power to have bills?

They have overdrafts.

All I can say is that they should have these powers. That is another matter, I suppose.

Amendment, by leave, withdrawn.

I move amendment No. 11:—

In paragraph (h), page 6, to delete all words from and including the word "which" in line 12 to and including the words "Cork Stock Exchange" in line 15 and substitute therefor the words "and issued not less than two years before being bought by the bank."

In advocating this amendment I propose to take the point of view which was strongly manifest in the report of the majority of the Banking Commission, namely, that the central bank should under no circumstances be used as a machine for the long-term financing of Government expenditure. In the original draft of this Bill, and as recommended by the Banking Commission Report, there was a proviso introduced that the central bank, in the exercise of its open-market functions, might buy Government securities, but they must have been at least two years current, that is, they must have been effectively owned by some private investor for at least two years, the object being to prevent the bank from being used as a machine by which new long-term loans might be issued which were not taken up fully by the investing public, but which were to be taken up in effect by the bank, thus, in effect, inflating the whole national financing system.

The objection to the present form of the Bill, which is much weaker than the original draft—as the Minister will readily agree—is that it would be possible with an unscrupulous Government —mind, I am not suggesting that the present Government are likely to yield to that temptation—dealing with a somewhat weak-kneed committee of the Dublin or Cork Stock Exchange— if we can imagine that those bodies are capable of developing weakness of the knees; and it is surprising how weak-kneed even quite respectable people sometimes become when what is called strong Government pressure is brought to bear upon them—it would be possible for these very worthy institutions so to alter the terms on which they are prepared to quote national loans that by this machinery you might by an indirect route have in full blast the full mechanism of large-scale inflation. I am prepared to argue, in connection with another amendment, that some degree of controlled inflation might, in certain circumstances, be a good thing and that that controlled inflation might be operated with the combined wisdom of the Government and the board of the central bank, but it, certainly, could never be a good thing that that should take place in a large-scale, unpremeditated way without the full knowledge and cognisance of the Oireachtas, as might happen if we can imagine the machinery of this section being used by an unscrupulous Government dealing with a complacent Dublin or Cork Stock Exchange. I should much rather see the original two-year limit put back into this part of the Bill and, if we must have a mechanism of inflation, let us have one which, in its maximum scope, is clearly and consciously controlled by the Oireachtas and which, in actual operation, reflects the closest co-operation and confidence between the board of the central bank and the Government of the day.

I am in favour of the principle of this amendment. I should not object to the two years being reduced to one year but I think that the dilution of this precaution which has taken place in the Dáil has nullified it completely. There are methods by which a quotation on the stock exchange can be really of no effect. This provision is open to the most blatant form of evasion and I think the Banking Commission Report should have had greater weight than it appears to have had with the Government since this Bill was introduced into the Dáil. Two years was the limit recommended by the Banking Commission. Then one year was introduced and then this purely nominal safeguard of a stock exchange quotation was substituted. I hope that the Government will consider restoring in some measure the recommendation of the Banking Commission.

The House knows that, as originally proposed, the section did have a two-year limitation on securities. There was, however, very strong pressure in respect of this matter and what seemed to be convincing arguments were used in the Dáil to get rid of that limitation. Prudently, I think, I fought the proposal but, eventually, allowed myself to be convinced. I reduced the period to one year. As I listened to the arguments, I decided that, perhaps, those who were in favour of removing the limitation were wiser than I and I accepted the present provision. I do not think that Senator Johnston or Senator Keane expects me to go back on what I did then.

We have no hope that you will.

I wonder if there is any great wisdom in retaining the reference to the Dublin and Cork Stock Exchanges. Senator Keane does not seem to think that it is of much value. Does the Senator suggest that it should go out?

It may be of some value but I do not think it is of very much value. It is, perhaps, some kind of test of the value of the securities. Having permitted myself to be committed to the wisdom of dropping the original limitation, I must adhere to that decision.

The Minister might now permit himself to be reconvinced.

The Minister has not conveyed to us the strong arguments which induced him to change his view. As the matter stands, the arguments are all in favour of the amendment.

The House asked me to postpone discussion of this Bill until Senators would have an opportunity of reading and digesting the Dáil debates.

I did read the debates and I want to know which of the arguments convinced the Minister that did not convince me?

Amendment, by leave, withdrawn.
Amendments Nos. 12 and 13 not moved.

I move amendment No. 14:—

To add to the section a new paragraph as follows:—

(m) lend to the State by way of Exchequer bills or short-term loans not more than two million pounds in any one year or ten million pounds as a maximum.

I find myself in a somewhat peculiar position. If I had been successful in persuading the Minister to revert to the two-year limit in the case of the former amendment, then I would, with complete confidence, have advocated this amendment. As the Minister already has in the section, as it now stands, power to inflate to his heart's content, if he chooses to behave in the unscrupulous way we know he personally will not behave, I hesitate to put the arguments in favour of the minor mechanism of controlled inflation contemplated by this amendment. However, it might be interesting if I were to play the part of the devil's advocate, and express what I consider to be the reasons why we should have some power of controlled inflation, to be exercised by the Government through the operation of the central bank. Undoubtedly, this proposal, that the State should be able to borrow a maximum of £10,000,000 from the central bank in amounts of not more than £2,000,000 annually over a period of years, is an inflationary mechanism. But the first thing I would say about it is that that mechanism is definitely under the control of the Oireachtas.

The figure of £10,000,000 is mentioned, as is the figure of £2,000,000 annually. That figure cannot legally be exceeded without the Government coming to the Oireachtas and asking for fresh powers. It seems to me that if we consider the general position of our currency in relation to its sterling parity—I shall not go over the arguments about this question again but I still strongly hold that in any foreseeable future we should maintain the sterling parity of our currency—we shall find that there are reasons for believing that the real purchasing power of the Irish £ is now somewhat greater in terms of a representative parcel of goods and services than the real purchasing power of the sterling £, especially when you add to the price of the limited amount of the necessities of life which people can buy in Britain and Northern Ireland the element of subsidy which appears in that price, which the taxpayer pays and which the consumer does not pay.

If you calculated the price of parcels of goods in Britain and in Éire, respectively on that basis, I think you would find that the purchasing power of the Irish £ is, under present conditions, somewhat greater than the purchasing power of the sterling £. Now, it follows from the logic of our adherence to sterling parity that we should maintain the economic equivalence of the purchasing power of the Irish £ as well as the financial equivalence, and, consequently, if the sterling £ is becoming to some degree inflated, as I think there is some degree of inflation over there, we, too, should adopt the same co-efficient of inflation with reference to the general purchasing power of the Irish £. Senators are probably familiar with the fable of the frog and the bull, and how the frog blew itself out to try to become the same size as the bull. Well, now there is no question of the Irish frog being blown out to the same absolute size as the English bull, but what I suggest is that there is a reason why we—not necessarily we, but the board of the central bank—should be able to consider whether we should not apply the same co-efficient of expansion, so to speak, to the Irish frog that is being applied to the English bull as part and parcel of the logic and philosophy of maintaining the parity of value of the Irish £ with sterling. That, of course, would be an inflationary procedure, but, as things are, we are the victims of inflationary forces flowing in on us from outside. We have the headaches of inflation without having the intoxication of it, or without having that alleviation of the burden on the taxpayer that some degree of controlled inflation would give us.

I want, not so much this House as the Government and the board of the central bank, to consider whether we should be purely passive in our attitude to these inflationary forces, and in our attitude to the possibility of a policy of controlled inflation, or whether, in fact, our circumstances do not require that we should inflate ourselves to such a degree as to keep step with the degree of inflation coming across the Channel and, consequently, maintain the sterling parity on a basis of economic as well as financial equivalence. I am making these remarks more by way of suggesting something for the future board of the central bank to study and investigate than with any desire to arrive at a cut and dried conclusion here and now. As far as I can see, a policy of controlled inflation by us under present circumstances would not increase in any way the prices that we are now paying, or are likely to pay, for imported goods. Those prices are determined by the price and income structure of a neighbouring country, and will come to us governed by those factors and quoted at those prices anyhow, no matter what we do by way of a locally controlled inflation. On the other hand, if it could be operated in such a way—and I am quite aware of the technical and administrative difficulties of so operating it—that the locally controlled inflation would bring about a greater consumption of those export goods which we still are in a position to export, things like beef, for example, and eggs, then I think the general tendency would be to reduce somewhat the proportion of those export goods which we must throw on the export market and to strengthen our bargaining position with our neighbours and enable us to command somewhat higher prices for those export goods. So that a policy of controlled inflation might somewhat improve the price level of our export goods and, incidentally, stimulate a greater activity of production in what is now a relatively depressed part of our economy, and thus put us on a fairer and more balanced economic basis.

Now, if this amendment or anything analogous to it should become part of the Bill, I should hope and expect that it would only be operated by the Government in fullest co-operation with the central bank, and only after the fullest study of all these various matters which I have tried somewhat crudely to outline. It is not possible to be quite certain about some of these facts, but I do think that they would repay further study and examination by an expert body. Inflation in any form is always liable to create certain social hardships and injustices, and it would be, I think, part of the duty of the Government, in consultation with the central bank, to take whatever steps are possible to prevent a rise in the internal price level bearing unfairly on the poorer sections of the community. In that connection, I think the Government should consider the whole question of family allowances, and also to what extent we should subsidise the price of the downright necessities of life which are of most importance in the budget of the poorer classes. Inflation, accompanied by measures of that kind, to ease the places where the shoe might pinch on the poorer sections of the community, might be a policy well worth considering. Anyhow, for what it is worth, I have expressed these views, and I hope they will receive the consideration of those who are qualified to give a valuable opinion about them.

Business suspended at 6 p.m. and resumed at 7 p.m.

I merely want to say, following upon what Senator Johnston has said, that it would be much safer not to put this temptation towards inflation in the way of the central bank. I think the Government have got all the power they want under the section. The central bank can indirectly participate in new issues and, having given them that power, it would be undesirable also to give them the open power of borrowing up to the extent of £10,000,000. It is safer to keep the thing on realistic lines and not gamble in these inflationary ideas.

I think Senator Johnston was not very earnest about his amendment. He was rather sceptical, I think, of its utility, certainly of its advisability. I have argued against suggestions and amendments of this kind more than once on the ground that the tendency to inflation, at the present time at any rate, is there in a sufficiently strong measure and it is difficult enough to control it. It is controlled to an extent, but a certain amount of inflation goes on, no matter what we can do. Adopting a proposition of this kind is definitely encouraging inflation and, though the Senator suggests that it is controlled inflation, once you start out deliberately in this fashion inflating currency, I think the measure of control that can be exercised will probably end up by being very remote, if existent at all. It is much safer that any money needed should be got out of the savings of the people. The central bank will not have such savings or such deposits at its disposal, and so long as there are savings to be called upon—and there are plenty of savings in present conditions—it is not alone for the immediate benefit and welfare of the country and community as a whole, but for the remote welfare or the welfare at all times of the country that whatever schemes require the expenditure of money in large sums, such as the Senator proposes to deal with in this amendment, should be financed out of the savings of the people through the ordinary channels.

Amendment, by leave, withdrawn.

I move amendment No. 15:—

To add to the section a new paragraph as follows:—

(m) lend to the State by way of land bonds a sum not exceeding £5,000,000 for advancement to farmers who need credit on the security of their lands such advances to be repayable over a period of 38½ years by annuities of 4¾ per cent. (3½ per cent. interest and 1¼ per cent. sinking fund).

On Second Reading, the Minister made the statement that he intended to refer this question of credit for farmers to the post-war agricultural planning committee which it was then proposed to set up. I want to tell the Minister that I have no confidence in that committee, and that the farmers of the country will have no confidence in its findings. I want to say further that to refer this matter to any other body for consideration is simply a matter of sending the fool further. This proposal has now been under discussion since 1939 or a little earlier. It was first sent to the Agricultural Commission on the recommendation of this House, but that commission was dissolved before it got time to consider it. I can never understand why that commission was dissolved and the present committee set up.

The next move was about six months ago when it was considered at a conference of high Government officials, representatives of the banks and the Agricultural Credit Corporation, one or two professors, Senator Johnston, Deputy McGilligan and myself. That conference was called through the kindness of the Minister for Finance at my request in order to give me an opportunity of propounding my scheme to these experts, for which I am very grateful to the Minister. I do not propose to refer to the statements made at that conference as there was an understanding that the proceedings were to be treated as confidential, but I think I can say that it was agreed that the chairman would recommend that the Government should guarantee loans to farmers in need of credit at a 4 per cent. rate of interest, and before anything is done in that direction the matter must again be considered by a new "brains trust" of professors which is supposed to have been set up by the Minister for Agriculture, but which I think it would be more correct to say has been set up by the Taoiseach, as we all know his predilection for the opinions of professors.

Leas-Chathaoirleach

The Senator must not discuss that committee any further. This amendment has nothing whatever to do with that committee.

I am referring to the statement of the Minister for Finance that the matter is to be referred to the Committee on Post-War Agricultural Planning which has been set up.

Leas-Chathaoirleach

I cannot allow the Senator to discuss the personnel or composition of that committee, or its actions.

May I say that I have a great admiration for professors in their own sphere? They are people with very keen brains.

Leas-Chathaoirleach

In what connection is the Senator discussing professors—in connection with the committee or the amendment?

This matter is to be referred to this committee——

Leas-Chathaoirleach

I have said I cannot allow the Senator to discuss the composition of that committee. Can the Senator not address himself to his amendment?

Can I not say a few words about the professors?

Leas-Chathaoirleach

The Senator will have to do that on some other occasion.

I have said a few words giving expression to my dislike of their mentality. Can I say a few words in praise of them now?

Leas-Chathaoirleach

No.

To come down to the amendment, the question will arise as to the manner in which the proposal will be carried out. Is the central bank to issue bonds direct to the farmers, and how are the annuities and the bonds to be collected? My idea is that the only function of the central bank in this matter should be, after consultation with the Minister for Finance, to sanction the amount of bonds to be issued and make regulations regarding the sale of the bonds and the interest to be paid. The issue of the bonds and the collection of the annuities should be the responsibility of either the Land Commission or the Agricultural Credit Corporation, or of both working together, but that is a matter for the Government to decide.

My original proposal was that the bonds should bear interest at 4 per cent. and be repayable over a period of 50 years at 4½ per cent., and that the bonds should be given to all farmers without any restriction; but, to meet the wishes of the majority opinion at the conference, which was that that proposal would be a broadcasting of credit, that 50 years for repayment of the advances was entirely too long and a 4 per cent. interest on the bonds entirely too high, I put forward new proposals. After that conference, in view of the opinions expressed by the majority of the representatives there, I sent the following letter to the chairman.

I thought the proceedings of that body were to be regarded as confidential?

But my own scheme cannot be regarded as very confidential. I do not think I will have anybody to blame except myself. This is the scheme which I put up, and there is nothing very confidential about it. I am not referring to what anybody said. My letter to the chairman was as follows:—

"Although I still believe that my scheme as originally put forward would produce the best results, I now submit a revised plan to meet the objections of —— and —— to unrestricted credit, and your own objection to 4 per cent. interest on bonds.

(1) The Government should immediately introduce legislation to authorise the Land Commission to issue up to £5,000,000 of Land Bonds to be given to farmers who need credit, to work their land.

(2) The bonds should bear an interest rate of 3½ per cent. and be repayable over a period of 38½ years by an annuity of 4¾ per cent. (3½ per cent. interest, 1¼ per cent. sinking fund).

(3) The bonds to be the property of the farmer, but may be transferred to the legal ownership of the banks or others as cover for a loan.

(4) It should be enacted that the bonds are for future credit, and that no claim can be made against them for previous bank or other debts, and that the bonds cannot be sold without the specific consent of the Minister for Finance, but when this consent is obtained the bonds should be transferable and saleable, with the same freedom as ordinary Land Bonds.

(5) A farmer who applies for an issue of bonds should prove to the Land Commission that he is in need of credit to work his land, and the Land Commission should be satisfied that the applicant is capable of managing his land and using credit, and is a person likely to be able to pay the increased annuity. When the applicant fulfils those requirements, the Land Commission should then issue to him bonds for an amount up to 20 years' purchase of the remitted annuity under the 1933 Act. If the applicant holds his land in fee-simple, an amount up to ten years' purchase of the poor law valuation of his agricultural land.

(6) The amount of the advance should not in any case increase the future combined annuity on the land to more than the amount of the old annuity prior to 1933.

(7) The annuity payable on this issue of bonds should be a first charge on the land in the same manner as the ordinary annuity now paid to the Land Commission.

Although the lowering of the interest rate on the bonds to 3½ per cent. and the raising of the sinking fund to 1¼ per cent. make the scheme less attractive than my original plan, but even in this form the bonds will still be very valuable to a farmer in need of credit.

I trust that this revised plan will meet the objections raised and get the unanimous approval of the conference."

Well, it did not get the unanimous approval of the conference; it did not get approval at all. I think the idea must be that the rate of interest did not suit the banks.

It was too low.

I have been told by the opponents of this scheme that the farmers would not pay their increased annuity. My reply to that is that the farmers were paying annuities to the British Government for 40 years before this State was established, and that, when this country set up its own Government, the amount of annuities in arrears to the British Government was only a fraction of 1 per cent. I understand that even last year 80 per cent. of the annuities were paid, and a considerable amount of arrears as well, although it was a very disastrous year, with foot and mouth disease and other misfortunes in agriculture. What is the increased annuity under my plan? I say there is no increased annuity to the farmer who keeps his bonds for accommodation. The farmer who gets a £100 bond from the Land Commission certainly pays an annuity of £4 15s., but he gets a dividend of £3 10s., and the balance of £1 5s. is put to his credit in the Land Commission at compound interest. Together with that, he has an instrument by which he can go to the bank and obtain money at 3 per cent. or 3½ per cent. at the outside.

It has been said that the banks or the Agricultural Credit Corporation will give the farmers all the credit they require; of course, that applies only to credit-worthy farmers. Here is an example of how the scheme would work out. In the first case, under the bond scheme, we would have a net rate of interest at £3 4s. per cent. If a farmer went to the Agricultural Credit Corporation and got £100 advance for the purchase of implements, seeds or manures, repayable in five years, it would be £22 17s. 2d. It would be £22 17s. 2d. against £3 4s. If he got £100 for the purchase of stock, repayable in seven years, the annuity would be £17 2s. 2d., or if he got £100 for the erection of small hay barns, repayable in 15 years, it would be £9 11s. 2d. If he got £100 for permanent buildings, repayable in 35 years, the amount would be £6 1s. 8d. After the 35 years, when he had his annuity completed, he would be clear of debt, but he would have no bond left. In my case, after the 38½ years, if he continues paying his annuity and retains his bond, he will have cleared up his annuity, and he will have his £100 bond to do what he likes with.

I cannot see why there should be such objection to that scheme. It has been accepted by some of the best brains in this State, and by some of the most conservative politicians in this State. It has been accepted by Deputy Cosgrave. It has been accepted by Professor Johnston. It has been agreed to and advocated by Deputy McGilligan, and, up to a certain point, the banks were in thorough agreement with it, whatever made them change their minds. They did not like the idea of 3 per cent. or 3½ per cent. interest. It is because this scheme will be the only means of getting credit that I strongly advocate it. I admit that my principal concern is for the grazing farmer, particularly in Leinster, who was wiped out by the economic war, and who is now, in a good many cases, only a herd or caretaker on his own farm, having got into that position through no fault of his own. We have about 350,000 farmers in Éire but only 28,000 of those own 100 acres or upwards. I think it is agreed now by most people that it is a good economic policy to retain at least that number of large farmers in the country. From inquiries I have made, and from the information I could get, I think one in four, or about 25 per cent., of those 28,000 farmers are in need of some sort of credit. Working on that basis, I believe that anything less than £5,000,000 would have very little practical effect in providing the credit which those people require. To offer less than £5,000,000 would be only tinkering with the job. The banks used to lend money to the farmers and lend very liberally indeed. What has happened to make the banks cease giving advances on the security of land?

That is not true.

Of course, they can truthfully say that in a good many cases, particularly in the case of farmers of the larger type, the farmer has no longer a good security, that he does not own his land, that he has no fixity of tenure and that, consequently, his farm is useless to the bank as collateral security. Something can be said for that point of view. The small farmer has his land all right, but the small farmer never got any credit from the banks. In the case of the big farmer, with a holding of from 200 to 300 acres, the Land Commission can interfere with his rights of ownership at any time. The banks, as the result of their experience in these cases, have no further confidence in the security of these farmers, and they will not accept such land alone as collateral security. I can say that the bankers and the farmers did not always see that. I remember when the 1923 Land Act was going through this House, Senator Sir John Keane, when his colleagues representative of the banking interests were supporting that Bill, opposed it. When all the farmers in the Seanad at that time were supporting it, I also opposed it. We were the only two Senators who could see in those days what was to be the result of some of the sections of that Act. It was to open the way for abolishing the farmers' security and every Land Act that has been introduced since has been worse, more and more detrimental to the farmer's security.

I am not advocating any revolutionary change in our monetary system. Most farmers are fairly conservative and I think the charge that they are looking for the Major Douglas scheme is all nonsense. It is all nonsense to say that the farmers want any revolutionary scheme or monetary system in this country, but I say that if we are to have prosperity in the country we must restore to the farmer his security on the land. We must do something to repair the ravages of the economic war which put the people in whom I am mainly interested into the position in which they find themselves at present. They have not credit, they have not cash and that is all due to the action of the Government. It is the Government's duty to do something to repair that injury. I am not advocating money at 1¼ per cent. as some Senator suggested yesterday. I am not looking for charity for the farmer, but I want the Government to do something to provide them with working capital and give them an opportunity of restocking their land and getting into production again. If the policy which I advocated in 1939 were carried out, these farmers would be in a fairly prosperous position to-day. It was not carried out and there was a reduction in the number of stock. Now, we are told by the Irish Press that the more cattle we can produce the better off we shall be. When I was putting up this scheme in this House in 1939, I was told that the farmers would be foolish to avail of it, that they would be only losing their money. What makes me so cross with the professors is that the only solution some of those with whom I have discussed it could offer to cure this evil and to restore prosperity to the farmers was to advise them to sell portion of their land and to work harder. You might as well ask a farmer with 100 acres to cut off portion of his leg or his arm as to ask him to sell portion of his farm. The farmer with 100 acres will not sell part of it at any price if he can hold on to it. I should like to say to these professors that I do not want the farmers or the agricultural workers to work any harder than they are working at present.

Might I ask the Senator to make it quite clear that it is not this professor he is referring to?

Leas-Chathaoirleach

He has been cross on many matters which have little connection with this amendment, I regret to say.

I hope the Minister will accept the amendment.

I should like to ask the Senator two questions in relation to the proposal he has put forward. Firstly, how would the proposal work out in relation to a man who had got the loan he proposes and who later on made up his mind to dispose of his land? Secondly, how would it work out in the case of a man who got a loan on this system and from whom the Land Commission subsequently proposed to acquire his land? I should like him to explain these two matters.

Ba mhaith liom cupla focal a rá ar an gceist seo. Ba mhaith liom go ndéanfadh an tAire géar-scrúdú ar an gceist. Tá sé soiléir dúinn go léir gurb iad feilméaraí na tíre na daoine buantseasmhaighe agus na daoine is tábhactaighe, mar bíonn siad ag obair ar an talamh. Mara mbeadh na feilméaraí ag dul ar aghaidh, níor bhféidir leis an tír dul ar aghaidh agus níor mhaith liom go ndéanfaimuisne annseo dearmad ar sin.

I would recommend this amendment of Senator Counihan's to the careful consideration of the Minister. The great majority of us belong to the farming stock of the country—the workers on the land—and we are proud of that fact. No section in this House should cast a slur on the people who represent the great bulk of the assets of this country, because if you have not a prosperous farming community you will have nothing in the country. I think that this country suffers from over-urbanisation and that the people living in the urban areas, important as they are, have to rely on the influx of the rural population into their midst. This proposal of Senator Counihan's would do much to help the farming population. I know the Minister will go as far as he can to meet the proposal. All of us in this House are anxious to do what we can for the country. I was never one who stood for sectional interests. I do not agree with Senator Counihan's views about the economic war. The economic war might not be——

Leas-Chathaoirleach

Relevant.

——relevant to the present discussion. I believe that if we had not had the economic war we would not have regained so much self-sufficiency. I believe that self-sufficiency is all-important. If we had not had the economic war, we would probably be drawn into a conflict in which we had no interest and no concern. I do not want to make a Party or political speech. The main thing is to preserve the lives and fortunes of the people of the country. I do not agree with people who say that certain of the farmers are down and out. The question of their being down and out concerns themselves personally. Many people may be down and out in the next few years. We who advocate the farmer's interests will not throw stones at them in regard to being down and out. We are living in revolutionary times. We have not control over the whole of this State at present, but in the very near future we hope to have an all-Ireland Parliament. A Party which advocates a certain system may find themselves left out in the cold. You must move with the times. The farming community and the workers on the land are the most important element in the State. If you cut these out, the industrialists, all-important as they are, will not count for very much. The important thing for this country is to see that those who live on the land and who support workers on the land are able to continue in their business.

From the statements made by the Minister, I am sure that he will go as far as is possible to meet the point put forward by Senator Counihan. As I stated, this is not a sectional matter. It is in the interests of the people of the country because, divided as we may be on many issues, we all realise that if the more important section of the community is prosperous it will react on the prosperity of the other sections of the community. As I said, the great majority of us sprung from the farming class or the workers on the land. These are the most important sections of the community. We do not want to decry any other sections of the community, but it is in the interest of a progressive Government to do what is fair and reasonable for the most important section of the community. We do not want to encroach on the rights of any other section. I hope the Minister will do what is possible to meet the viewpoint put forward by Senator Counihan in this amendment.

I should like to support the amendment because I believe that anything which would help the farmers would reflect itself in the lives of the workers on the land. We know of the tendency to leave the land. Everything that can possibly be done for the relief of the farmers and the workers on the land should be done in order to counteract that tendency. Generally, our policy would be guaranteed prices for the farmers, as far as that is possible. We had to stand by on a certain occasion when guaranteed prices were proposed because it was rather late in the season and an arrangement could not be made. But, generally, our policy would be guaranteed prices for the farmers and a standard wage for the workers. I am not one of those who expect that the workers can get a wage the farmers could not afford.

Leas-Chathaoirleach

Will the Senator relate his remarks to the amendment?

Yes, I am supporting the amendment.

Leas-Chathaoirleach

I would like to hear the Senator from that point of view.

I am supporting the amendment for that reason. We are helping the farmer and, through the farmer, we hope to help ourselves. The Senator quoted some very good authorities for his amendment. He is a lover of professors sometimes and he has quoted some distinguished professors and distinguished authorities. I have not examined closely the terms of his amendment; I should have done so by right, but generally I think the case that he has made is quite a good one. I trust the Minister will give it careful consideration and see what can be done. If it is not done through this much-talked of central bank, I hope that he will take some other steps to do it. Possibly the commercial banks will come to his aid and give some of the £180,000,000, or whatever the sum is, of idle cash they have. Senator O Buachalla made a remark the other day about schemes. "What would we do with the cash if we had it," he asked, "when we had no schemes?" The farmers I am sure have schemes. The Labour Party will be able to put up ample schemes if the money is forthcoming and if Senator Sir John Keane disgorges some of the £80,000,000 excess that the Bank of Ireland had this year over last year at a small rate of interest. I think 3½ per cent. is too much.

I have so much admiration, not only for the persistence, but for the ability——

And ingenuity.

No—with which Senator Counihan puts forward again and again on every occasion the needs of farmers and the case that he makes for them, that personally I very much regret that it is not possible for me to support the amendment. The reason I cannot support it has no relation to the acceptance or otherwise of the arguments or of the merits of the scheme he puts forward. It is simply this, that I do not visualise the central bank as a substitute for government. I am in sympathy, much more than the Minister will be, with people who are so disappointed with the present Government that they think that almost anything would be a better substitute. I think that a good deal of the misunderstanding is due to the fact that a new body is being set up and people are trying to get it to do things which they failed to get the present Government to do.

Apart from the fact that I do not think it is the function of the central bank, I suggest to Senator Counihan that I believe it would be easier to get a Government elected that would adopt his scheme than to get seven or eight bankers to sit down and adopt it. If he substituted the central bank instead of the Government as a body to decide the extent to which they would finance farmers, I think he would be doing a great disservice to farmers. I am not attacking the bankers when I say that they are liable to be more careful than a Government. Assuming that Senator Counihan's scheme were adopted as State policy, and that it should be carried out through the central bank by means of advances, we would do what we do every year in the Finance Bill where it is provided that the Minister may borrow and the Bank of Ireland may lend. In the nature of things powers would be given to the central bank or to any other bank to fulfil the required functions. When we approach a problem of this kind, we should approach it as a national problem. That must be done by the Government, and in so far as it may be found convenient or proper it must be done in a Bill in which the necessary powers are taken. That is my reason for not supporting the amendment and not because I have not considerable sympathy with its object. I see certain merits in the scheme put forward but I feel it is not the function of the bank, and that it would do real harm if we got it into the heads of the people that it was the function of the board of the central bank to decide the question of credit for farmers.

Apart from the machinery, my objection to the amendment is that I do not see where the central bank comes in. If the Government in its wisdom wants to give farmers loans at 3¼ per cent. and also to have capital repaid it can be done. The Government may get £4,000,000 or £5,000,000 and lend to farmers. Why bring the central bank into it? It is not the function of the central bank. If the Government wants the money it can be got easily in other ways. With regard to the principle of the proposal is it to be a case of first come first served? Will the £5,000,000 be given out to the most deserving cases, or will a year be spent considering applications, and the money divided amongst the most deserving, pro rata?

I stated that I made inquiries and got all the information I possibly could. Amongst 28,000 farmers who have 100 acres, I found that about 25 per cent. of them badly needed credit. It worked out that £5,000,000 would fill the bill.

The Senator can visualise many more applications. My main objection to the amendment is the method suggested. The central bank should not be brought into it at all.

I have not much to say on this amendment. I agree with Senator Douglas and with Senator Sir John Keane that there is no place in the central bank for any such scheme for agriculturists, workers, capitalists, commerce or any other section of the community. It does not belong here. The Senator knows that as well as I do, but he has a bee in his bonnet about agricultural credit. There may be some remote foundation for it—not much—but in season and out of season, he has put this proposition before the House. All credit to him, if he believes there is a necessity for a scheme such as he advocates. I have nothing to say against that, but it has no place here. No reasonable Senator would agree that it belongs to the central bank. As for the scheme itself, I do not think there is much to it. I think it is as hopeless a scheme of finance as any sensible man could produce. The Senator talked all the time of farmers who hold 100 acres. Imagine the Government producing £5,000,000 and saying that nobody would get any of the £5,000,000 if he had less than 100 acres.

I did not say that.

When pointing to the foolishness of the claims that are made—and the Senator made them a half dozen times about men with 100 acres — imagine any Minister for Finance or central bank saying they were to get £5,000,000 in land bonds. Of course no central bank would do that. I would not allow them to do it if I had my way.

They could not do it.

The Senator stated that this proposal was for men with 100 acres. I know that it is evident from the newspapers that it is a bid for a general election. It is not part of the proposal as far as Senator Counihan is concerned, because he has been at it for years. But others have taken this up, because they think there is some political motive behind it, and that the farmers will bite. Already we have serious arrears of land annuities. Do Senators think that farmers will re-burden their land with the old annuities—because that is what it would mean—and put this on their backs? I do not think they are such goms. With all respect, I suggest that farmers are hard-headed men, who know a good thing when they see it. This is a foolish proposition and it has no place in a central bank scheme. The Senator readily seizes any and every opportunity to talk about credit for farmers. He has not yet proved that there are enough farmers in this country, even with 100 acres, who need £5,000,000 or who could usefully and reproductively use that amount if they got it. He has not proved that in anything that he has said yet, anyway. I do not want to go into the privacy of any conference and I say, with all respect to the Senator, that I think he has broken confidence by his statement here, because it was agreed that the proceedings there should be confidential. He has not kept them so.

I have not kept it?

The Senator has not.

In what way?

I will leave that to the Senator. That is my opinion—that the Senator has broken confidence.

I would be sorry that the Minister or anybody else would think that I would do that. I would like it to be pointed out to me in what way I have broken confidence with regard to that conference. As he has made that statement, would he give one instance?

The Senator detailed to the House a document that was put before the conference in detail for discussion and told us what the view of the conference was with regard to that document.

And I got permission to do so.

Was the conference asked?

There would be no need to ask the conference for permission to put before the House what I said myself and my own communication to the chairman. I see no breach of confidence in doing that.

I understand that the proceedings of the conference were to be regarded as confidential.

I did not refer to the reaction to that document.

Oh, yes; the Senator said that no one in the conference accepted it.

I said it was not accepted.

Is that dealing with what happened at the conference or not? I treat the Senator and every other Senator here in this House as a gentleman. I have treated the Senator—as he has admitted here—more generously than he is generally treated in this House by others. I set up that conference—not at my own request, I had nothing to do with it—and I understood that the conference agreed that their proceedings would be confidential. The Senator has not so regarded it. He can make what he likes out of that, but it teaches me a lesson. This scheme has no place in a central bank and no sensible person would put it forward in that regard.

On the general question of agricultural credit for farmers—any class of farmers—if it is proved to me that there is necessity for it and that agriculture needs cash, I assure this House that I will get the money and that I will fight as hard as any Senator here for it. Senator Baxter, Senator Counihan, or any other Senator here— most Senators are interested in agriculture—will not be a better advocate. I give that guarantee to the House and to those interested in agriculture personally. That is my view with regard to it; but, so far, Senator Counihan has not proved his case and I am sorry he made use of this opportunity to do a thing I did not expect of him.

I am not going to prolong this discussion or even comment on the place in which it might fit into the Central Bank Bill in the circumstances. However, the Minister has made a statement and I would like to have some indication from him as to what he means when he says that, if I or any other Senator or any other body can prove that there is a need for agricultural credit, there is no one who will advocate it with more sincerity or earnestness than he. He was applauded generally for that from his own benches. What will he accept as proof? Whose opinion will he canvass in this matter? He has heard it—or, at least, his predecessor has heard it from members on his own side of the House, that, in their judgment, there is great need for agricultural credit. I want the Minister to say what action can be taken to satisfy him that there is this need? What will he accept as evidence?

I have heard it stated by one individual that I accept as an authority— and I subscribe to the view myself— that agriculture in this country could absorb £100,000,000—not in one, two or ten years, but over a period. In what fashion can the Minister be satisfied that there is need for agricultural credit, and what action is he taking to have made the discoveries that will satisfy him? Some people have been advocating this for a very long time and are not making progress. That is a lamentable fact. I do not think we can go on like this very long. If the war concluded, there would be a terrific demand for replacements of all kinds and for equipment of a character not already employed in farming here.

And for manures.

Manure is really the smallest item in our whole economy in regard to a thoroughly organised progressive agriculture.

Leas-Chathaoirleach

I have allowed this matter to be raised as a side issue to the amendment, but I could not allow a debate on agriculture. It would be destructive of all order if it were turned into a full-dress debate on agricultural credit.

A Senator

Hear, hear!

It is easy enough to say "Hear, hear" when something is said that some people do not like.

The Senator is not saying something I do not like.

I would like the Minister to state what steps can be taken— it does not matter who takes them—to discover what the needs are. What action can be taken to satisfy this Minister or a Minister that the need exists and to indicate the dimensions of the needs which we say are there?

The Minister stated that I was advocating principally credit for 100-acre farmers and upwards. I have stated time and again in this House that my main concern is those grazing farmers who were completely wiped out as a result of the economic war. I do not want to go into a discussion on the economic war. The Minister realises that I have put forward the plea for the whole of the agricultural community as well as for 100-acre farmers. I said these are the people who suffered most and whom the Government wiped out, and that they should try to put them back into production. I never said that the credit should be given only to 100-acre farmers and upwards. However, the Minister seemed to think that I have committed an ungentlemanly action. It was done unconsciously, if I did. If the Minister will consult later with the secretary of the Department of Finance, he will find that there might not be such cause for complaint.

I have a letter here.

The Minister might not think I made such a terrible lapse.

Nothing terrible.

I understood that I was justified in quoting the statement, and I thought I had got permission to quote my own statement. Further than that I have never referred to a single statement by any other individual at the conference. I have quoted what I said myself. Perhaps, in the heat of the discussion, I might have said that the scheme was turned down. Anyhow, we have no results from it and, since we have no results from it, I think it is obvious that the scheme was turned down. When the Minister says that I have broken confidence in regard to that conference, all I can say is that I understood that there was a reference to another conference and that I could give details about my own scheme. There was nothing confidential about that, and, if the Minister thinks that I have broken confidence, then I apologise. But I wish to assure the Minister and the House that the last thing in my mind would be to do anything discourteous either to the Minister or the chairman of the conference.

I shall only say that I am sure it was by inadvertence that the Senator did not fully keep to the terms of the agreement. I am quite sure that he did not understand the terms of the agreement, and that the Senator did not intend deliberately to make any breach of confidence.

Will the Minister comment on the question generally?

I shall come to that later.

Amendment No. 15, by leave, withdrawn.

I move amendment No. 16:

To add to the section a new paragraph as follows:—

"(m) fix and publish from time to time the rate of interest to be charged by the associated banks heretofore known as Irish banks' rate which shall on and after the appointed day be known as Irish central bank's rate and the rates of interest graded thereon charged by the associated banks on advances and the rates of interest to be allowed by the associated banks on deposits."

I shall not take up much time on this amendment, but it is one of a series of amendments which I have put forward, the purpose of which is to give the central bank powers which I think it ought to possess. Actually, I think that if the powers proposed to be given in these amendments were given to the central bank, it would put the commercial banks in a more satisfactory position: they would be better off and know where they stand, instead of always being, so to speak, haggling for the last £100, like the farmer in the fair haggling for the last penny that he can get. I think that the central bank ought to have these powers. The more I hear, in debate here, with regard to the minds of the bankers, through the Governor of the Bank of Ireland, the more unhappy I am with regard to the interest rates in this country in the future. If we were at war, instead of being at peace, as we are—one of the few peaceful spots in the world—we could understand the attitude of bankers who feel that 4 per cent., or 5 per cent., would be a normal charge, but it seems to me that money is a thing which should fit into the whole scheme of economy of a country, and that when a country is at peace money should be more readily available, and at cheaper rates, than in the case of a country that is at war.

I think that this proposed board should fix interest rates, and that if that were done we should have far less of the speculative kind of enterprises that bring people into the kind of things we are experiencing to-day. I think that we ought to regulate our financial affairs, not in a speculative way at all, but that we should have some authority to regulate the price of moneys in relation to the things we would do with these moneys and the energies which would be employed by them. I know that the Minister will say that the proposed bank can, and will, influence these things in the future, but I would prefer that the bank would go out and arrange for these things now. I cannot understand how it is that the British Government, with colossal debts mounting up, with a position where taxation is not meeting expenditure, and where, obviously, an inflationary position is developing, can borrow at 1 or 1? per cent., and yet we have to pay 3½ or 4 per cent.

According to The Economist, of August 28th, 1941, the British Government can get money in the form of a loan at a rate of 1 per cent., or 1? per cent., but if we want to raise a loan for this country—a country which is at peace, and which has very valuable assets—I think Senator Johnston valued our agricultural assets at about £400,000,000, and then there are other people besides our farmers, and also these glorified external assets of approximately £300,000,000—with all that security, if the Government of this State wanted a loan to-morrow, the demands of the commercial banks would probably amount to something like 3½ per cent., or even 4 per cent., and perhaps telling the Minister also that if they did not get that rate of interest they would not discount the Exchequer bills.

Now, I am convinced that until the rates of interest in this country for borrowing for legitimate productive purposes—where we are actually going to produce goods against the money that is paid—are brought into some kind of a sensible relation to the goods produced and the money earned by their production we are not going to have stable conditions here—the conditions that are necessary as between man and man, and class and class. I would urge the Minister to accept this amendment, because I think that if the commercial banks knew that the central bank was being put into the position of being able to fix the price of money for national undertakings at reasonable rates of interest, it would be better for the commercial banks themselves. We are a conservatively-minded people, I realise, but it seems to me that we are still trying to keep in step with England, when England, as a matter of fact, has long ago altered the policy with regard to money and the rates of interest charged for it.

I sometimes really wonder whether or not I should take Senator Baxter seriously.

He does not mind.

But, as he represents the cross-roads view of finance in the country and as the cross-roads people are becoming more and more vocal, he has to be answered, even if his arguments have little or no weight. I would not deny that it is the duty of the Government, where cause is shown, to deal with profiteering, and control prices, and they have done so. But what cause has been shown to control the price of money? As I think I said recently, bank rates are one of the few services the cost of which has not increased in the last three years. The next point is: How do our rates compare with those of other countries? We cannot create these rates in vacuo. These rates are determined first of all by competition and, secondly, you might say, by the cost of production. Just as it costs the farmer money to grow an acre of wheat, so it costs the banks money to provide a banking service. Has the Senator any notion of the cost of providing banking services? I wonder if the Senator realises the cost involved in dealing with a customer's cheque—and I refer only to salary costs. The salary costs of handling a customer's cheque represents a unit of work which could be as high as 1/2 or even higher; the cheapest is about 4d. and the average —I speak generally—is 6d. It costs 6d. in salaries alone to do the work involved in handling a customer's cheque.

If it is going to control rates, the Government has got to take responsibility for the banking business. They cannot simply go out, as Senator Baxter suggests, and fix whatever rates they think the public would like. They have got to fix the rates on the cost of the service and with due regard to the bank's responsibilities, the bank's responsibilities, above all, to its depositors. Moreover, as the Banking Commission pointed out, it is very desirable for banks to show increasingly falling profits. In a healthy banking system, profits should be adequate, if it were only in order to secure public confidence. In that connection, the Banking Commission pointed out the steady continuous fall in banking profits and the fall has continued since. From 7.7 per cent. in 1931, the percentage which Gross Distribution bears to Capital and Reserve has fallen to 5.8 per cent. in 1941. That is not healthy from the point of view of the stability of the banking system. The Senator talks very glibly and irresponsibly about the banks, but I think he would have another story to tell if there was a loss among depositors, and then I think some of his own supporters would hold him to account for some of the dangerous theories that he has been propounding for some time past with regard to the practice of commercial banks.

Take the test of comparison with the rates in other countries. I am talking of the general rates with which, I think, the Senator is concerned, that is, the rates for ordinary industrial and agricultural purposes. Government rates are quite another matter. I will deal with them in a moment. The Scottish bank-rate on advances secured by marketable is 4½ per cent.; secured by other security, it is 5. The agricultural and commercial rates in Australia are 4½ to 5 per cent., and I would like the Senator to know that these rates in Australia are fixed, not by the Central Bank, but by Government Order. In New Zealand the agricultural and commercial rates are 4 to 5 per cent., minimum and maximum, and from information I have got, a farmer must have extra security beyond his land—to qualify for the 4 per cent.; rate; normally it is 5. In Canada the legal maximum rate is 7 per cent.; farming loans in the West are 6½; in the East, 6½, but they are 6 per cent. in Ontario; the commercial loans vary from 3 to 6 per cent. according to security. Then, I think, a comparison can be drawn with what the Government themselves charge for local loans. The Government are perfectly free to get money where they can. It is wrong to say that the Government depend on the banks for their money. The Government, in their wisdom, get the commercial banks to underwrite and the commercial banks, naturally, if they underwrite, have some say in the rate, but it is not in any way obligatory on the Government to go to the commercial banks. They can go to the open market if they like and get rates on the most favourable terms. We find that for local loans the Government's present ruling rate is 4¼ per cent. as against the bank-rate for loans to local authorities—overdrafts, too, as against loans which are generally lower—of 4 per cent. I am not blaming the Government. I think the Government have to have regard to the supply of and demand for money, the same as everybody else, but it is a fact that the Government is charging more for local loans than the banks are charging for loans to the local authorities.

In the nature of things, if this amendment is going to be carried, the central bank is, in fact, going to become responsible for the whole of the commercial banking in the country and will be responsible for any reactions that may arise. Rates are not entirely a domestic question. You have to have regard in considering rates to what can be got elsewhere. If the deposit rate was made unduly low in this country there would naturally be a temptation to people to try to put their money elsewhere. Similarly, with lending rates. If money could be got more cheaply outside the country it would be got. It is quite possible, especially for larger borrowers, to get accommodation overseas. The whole thing is bound up with competition, and if people who are in a big way of business can get money where it is cheapest, the rate is affected by such considerations. Are you going, in all seriousness, to bring the central bank into all that very intricate piece of mechanism and make them responsible for controlling all these rates? I think it would be insanity and, as I said before, if you are going to start this you might as well nationalise the banks and have done with it because the banks from day to day would not know where they were and the central bank would not know where it was because, in order to do this with any degree of justice, it would have to have day-to-day inquiries as to the expense involved in the whole of the commercial bank operations. It would be involved indirectly in all questions of salaries and salary increases and all the 101 matters that affect the economy of the commercial banks. I do hope the House is not going to lend itself to a proposal of this kind.

Earlier in the evening, I came to the conclusion that I would not take part in the remainder of the debate mainly because of your advice to us last night that we ought to help you to get this stage of the Bill through as early as possible and certainly this week. I only wish that the House had taken my advice in the summer and had proceeded to deal with as much of this Bill as was possible before the adjournment then, because there is a great deal that I would like to hear discussed more fully. There are many things that I would like to explain according to my own lights and there are many questions I would like to ask with a view to getting further information regarding them.

I am sorry to have, once again, to differ from Senator Baxter. I have the utmost sympathy with him in bringing this question of interest rates before the House and in stressing the great importance of the level of these rates. My objection to this proposal is mainly that it means very definitely—it is a matter of choice so far as terminology is concerned—either the socialisation or nationalisation of banking. I do not say that I am decidedly opposed to nationalisation. Somebody said that we had got to keep our eye on changes which are taking place, and that it may be necessary to change with the times. With that I agree. A stage may come in the life of this country when banking will have to be nationalised. But, from my own study of banking operations here and from a close study of the two volumes of evidence published by the Banking Commission of 1938, I can find no grounds for stating that the banks have been unjust with regard to interest rates. In 1938, when that commission reported, it is true to say that Irish interest rates were amongst the lowest in the world. To the best of my recollection, the figures given by Senator Sir John Keane fairly represent the position in recent times. I should say that, at the moment, our interest rates are as low as those which obtain in any part of the world.

When the banks here were charging 7 per cent. interest, the banks in Denmark were granting loans at 4½ per cent. I can produce evidence in support of that assertion.

That is correct.

I only wish that, when the Senator was speaking a short time ago, he had kept more rigidly to the points at issue than he did, instead of unduly delaying us and interfering now when there is really no necessity to interfere. I have said that Irish bank rates were among the lowest in the world.

That is taken from the report of the Banking Commission.

The Senator should not interrupt Senator O Buachalla.

My opposition to Senator Baxter's proposal is not due to any objection to having interest rates watched or fixed at such a level as will ensure the fullest utilisation of such resources as we possess. My objection is that it would mean that the central bank would have, in effect, to take over the whole banking business of the country. Senator Baxter has banking reform very close at heart but I am afraid that he is inclined to go much further than he realises. I should like to read a few lines from a book written by Mr. Ernest Bevin and Mr. G.H.D. Cole in which they examine this whole question of banking and finance. This was their conclusion:

"But banking reform is not enough. It is only an indispensable first step towards the reorganisation of industry on socialist lines. We are by no means to be numbered amongst those who believe that a few adjustments of the financial machine or even the most far-reaching changes in financial policy will rid us of all our troubles."

They proceed to deal then with matters not fully germane to this discussion. That is what is really at the root of this matter—that Senator Baxter does not realise that overhaul of the financial system will not cure the evils which he has in mind.

I said it would not— that a number of other things would have to be done.

The Senator has said that, but what I want to point out is that the implication of the Senator's amendment is, mainly, the nationalisation of banking. The nationalisation of banking would not, of itself, solve the difficulties. It will be necessary to go further, as this statement points out, and nationalise every aspect of the national life. I do not agree that such a step should be taken. As a result of my examination, I must reject on economic, as well as social and national, grounds, the whole idea of nationalisation of banking and its corollary, the nationalisation of economic and social services. I agree with the Senator that we must be very careful with regard to these interest rates. While some of us may look upon high interest rates as an evil thing, I sometimes think that they are a healthy sign. When I see interest rates beginning to sag or remaining low for a considerable time, I cannot help feeling that there is something wrong. That may seem strange, but the level of the interest rate at any particular moment cannot be taken as an indication of soundness or of unsoundness. One has to go much further with one's examination.

The fixing of the rate of interest is a very delicate operation and the rate of interest itself is a very delicate piece of mechanism. If interest rates are unduly interfered with, a variety of things—some unpleasant—may happen. I should like, if there was time, to have a discussion on this whole question of interest rates. A change in interest rates, without great care, may cause undue appreciation or undue depreciation of capital—that is to say, of people's savings. If one gives a little thought to that question of the depreciation of people's savings, one will find that it is a thing to be avoided. It would hurt not only the people with savings—those whom we freely describe here as capitalists—but it would hurt also every member of the community, even those who have to live by charity. I should like to deal with this matter further but, in deference to the wishes of the Chair, I shall try to finish without delay.

With regard to the need for fixing interest rates as high as they are fixed, it is not quite true to say that the bank makes its profits out of the interest which it receives on loans. It does get a certain portion of its profits in that way, but a great part of its profits is really derived from careful investment. Further, with regard to this question of interest rates, it must be remembered that the money lodged in the bank is lodged under two headings. Some of it goes into what are called deposit accounts, and the rest of it goes into what are called current accounts.

Now, a great deal of capital is made out of the fact that the bank pays no interest on these current accounts, but it has to be remembered that the proportion of deposit accounts in Ireland to current accounts is, I think, four to one, perhaps considered high now. I am not quite sure, but I do not think I am very wrong when I say that, for every pound lodged with the bank in a current account on which it will pay no interest, it receives on deposit £4 on which it must pay interest. So you see it is hardly fair, without a very complete examination, to charge the banks with making undue profits. I would like to see interest rates at such a level—I do not know whether they should be high or whether they should be low. I cannot say offhand—fixed at such a level that they would secure maximum production and employment as was suggested here last night. While I cannot say that the commercial banks have been unfair in the fixing of their interest rates, I feel more confident, now that the central bank is being set up, that it will be there as a kind of independent referee as between the commercial banks and the public, and that, owing to its independence, it will be able to secure, in the interests of the community, that interest rates will be fixed at the proper level. Firstly, I must say that I agree with Senator Baxter that we should have these interest rates fixed at such a level that the banks will get what is their due, and no more. I do not feel that they have so far been getting more than their due, but, at the same time, I shall be happy to know that there is now going to be what, in effect, will be an independent judge to say whether their conduct will be all right in the future.

Now, if, as is suggested here, the central bank were to come in and fix the rates of interest for the various kinds of business that the commercial bank will have to do, you would be imposing a task on the central bank which does not belong to the central bank at all, one which the central bank could not possibly do unless you pass over the whole business of commercial banking to it. That, as I say, is nationalisation, and it cannot stop at the nationalisation of banking.

Before the Minister replies, I desire to make one or two comments on what has been said. I am not going to be scared away from my amendment by the methods of Senator Sir John Keane, accusing me of my ignorance of the technique of banking, nor indeed by his comment, to put it mildly, that my stuff was merely cross-roads stuff. I may, indeed, be colossally ignorant of the technique of banking, but I suggest that there are a great many people, directors of our commercial banks, whose knowledge would not be much greater than mine. As I said in the case of my previous amendments, I have tried to discuss this as a commonsense, uninformed ex-bank director, a borrower at times, and with a number of other qualifications to discuss banking that I am not going to reveal just now. In the first place, Senator Sir John Keane joins issue with me that we should attempt to fix the price of money. He gave us the rates of interest in other countries. He said that in New Zealand it was 5 per cent., but did not say at what particular time that was the rate there. I am assuming it was 5 per cent. some time prewar. It makes a great difference what your own price-level for goods is at the time you are paying your rate of interest. I can tell the Senator that, as far as agriculture is concerned, the incomes of the farming community in New Zealand were considerably higher than the incomes of our farming community, so that they were in a better position than our farmers to pay the 5 per cent.

The Senator also made a point about the rate that the Government here charges for local loans, and asked why it cannot get money at a lower price. He then went on to tell us that the rates here are not a domestic question and have to take cognisance of prices outside. That is my quarrel all the time, that we have to take cognisance of the prices that we can get for our commodities outside. Senator Sir John Keane makes no protest when our farmers' prices are fixed and pegged down. His attitude is that the Government have the right to do that even though they might be able to get higher prices outside. If it be decided that it is in the interests of our community to peg down farmers' prices then it is going to be done. It may be a good thing for peace and order.

We heard a great deal from the Senator about deposits. I do not accept what he said, but, assuming it to be true, one finds if he goes into a bank a notice to say that the rate of interest payable on deposits £500 to £2,000 and over £2,000 is 1 per cent. In my view, the interest rates in New Zealand and the Irish bank-rates are not comparable when one considers that New Zealand has been a borrowing community, while here we have money piled up for years which, apparently, cannot be utilised. In that situation one wonders whether there must not be something wrong. These are some points which have struck me and there must be some answer to them. Senator Sir John Keane did not satisfy me a bit. The Irish people have great sums of money in the banks, and all they can get for it, even for sums up to £2,000, is interest at the rate of 1 per cent.

When farmers have an abundance of stock or commodities prices always cheapen. On the other hand, if the farmers' produce gets scarce and the community cannot get it, the people acting as a Government will come in and put a sealing price on it. They will even stop the produce going out of the country because it is regarded as an essential of life for the people. In an oblique sort of way, so is money, but the people who are managing it are able to tell us that the rates on money here are not just a domestic question—that you have to take cognisance of prices outside. We have to take cognisance of prices outside, and if it is considered better that our money should go to the ends of the earth, where it may be shot up by the Japs or somebody else, then out it is going to go, and the people at home can either starve or go short. Would it not be much better if that money were being utilised at home instead of sending it across the wide seas?

I may not be as orthodox as Senator Keane would like me to be, but I have my own approach to this matter, and the Senator is not satisfying me. It is all very fine for the Senator to meet my case by saying that this is cross-roads talk. It may be cross-roads talk, but I am not so extreme. I have always tried to be a reasonable person, but if I talk like this here, people like Senator Keane ought to take notice. If they think that we will sit tight and do nothing, they may be very much mistaken. That is the sort of thing that leads to chaos. We would have a much more orderly state of things if the central bank were given this authority, and I think that power ought to be taken in this Bill.

The Senator does not seem to appreciate the approach to this question of interest. The banks are not moving the money abroad; it is the customer who is in a position to do so if he wishes. If the customer gets a better rate elsewhere, he goes elsewhere and the banks have to have regard to that. I think the Senator has not appreciated that point. He said the banks are sending their money to the ends of the world. The banks have to make their profits and that is the main factor in determining interest rates. You cannot fix those rates in the air, as it were; that matter is determined largely by the cost of production, so to speak. If the Senator says: "You are making exorbitant profits and your rates are not justified—you are profiteering, in fact," I would appreciate that.

The Senator knows that when the banks wanted to increase their charges lately on account of their growing cost of production—largely salary charges —the Government stepped in and said: "You cannot do that until we hold an inquiry." The Government did hold an inquiry and, as a result of it, they said: "You are justified in increasing your charges," and they were increased. The Senator said he got no answer, but I am giving him one. We have had that inquiry into our domestic economy, by competent people, who came to the conclusion that the banks are not overcharging the public. Surely, the Senator must realise what service the banks provide. He says they are not all necessary. Customers will expect a friendly welcome when they go into the bank. They are in the position that they expect politeness and conversation, all of which costs money. I think nobody more than the farmer appreciates the courtesy that he receives when he goes to the bank. At certain hours during the day the banks are comparatively idle, but when the public demand comes there is great pressure so as to prevent customers being kept longer than is necessary. All that means considerable expense.

Will the Senator pay attention to these figures? Suppose you were to give back to the public in the form of reduced rates half the profits the banks now distribute the banks would be able to reduce rates, on an average, over the total range of advances, by 687 per cent.—say ½ per cent. In the same way, if they applied that half to increasing the rate on deposits, they could increase the deposit rate by 376 per cent., which is less than ½ per cent. —you might say by a ¼ per cent. That is the total amelioration you could give to the public if you took away half the banks' profits. Those are facts, and I hope the Senator will give them serious consideration.

Surely, it would be absurd to bring the central bank into the position of absolute control, because the minute salaries went up, or increased demands were made on the banks, it would be necessary for them to go to the central bank and say: "We want to increase our rates, because our salaries have gone up", and it would be continually a question of investigation on the part of an outside body into the domestic affairs of the banks. There is nothing to justify this. As regards the New Zealand rates, those I gave are the latest available in London.

The Senator made a point about low rates in relation to short-term borrowing. He must remember that the conditions in this country are totally different from those prevailing in England. There is a war on in that country and there is a fluid money market. Does the Senator appreciate what a fluid money market means? Does he realise treasury bills are virtually cash? If a bank holds treasury bills, it can turn them into cash at any moment, and that is an aspect of finance that does not operate in this country or in New Zealand.

Similarly, with regard to the treasury deposit receipts, whatever may be the ultimate fate of this temporary borrowing in England, these receipts are repayable at the end of six months. But the conditions are totally different here. In England every attempt is made to encourage savings and stop spending. Owing to the restriction on purchasing, money is finding its way into the banks; they are working on a high ratio of deposits, and their money is being lent to the Government at low rates of interest. These conditions do not apply here, and that places the whole question of short-time advances to the Government on a different footing. The conditions that exist in England bear no resemblance whatever to the conditions which prevail here. When it comes to long-term borrowing, I think we can say that the Government here can borrow very nearly at the same rates as the British Government can borrow in England. When the Senator talks of the Government being held up to ransom by the banks on the occasion of some future loan, he is just talking nonsense.

I have considered very carefully these amendments put down by Senator Baxter. I am anxious to get from any side suggestions that would be helpful and that would lead to progressive thought on this matter. This is one amendment I certainly could not accept. Some of the implications in it have been fairly fully dealt with by Senator O Buachalla and some by Senator Sir John Keane.

I think Senator Baxter himself realises—he probably did not put down the amendment without a good deal of consideration —what its implications are. In this section, power is given to the central bank to fix and publish from time to time the minimum rate or rates at which the bank will rediscount Exchequer bills or bills of local authorities. That does not go nearly as far as Senator Baxter suggests, but the fixing of that rate by the central bank is bound to have a certain important significance. If we were to go the further step that Senator O Buachalla wants, we would be controlling. There is a terrible desire on some people's part to control everything, to centralise everything.

It was Senator Baxter, I think, who desired that. I did not.

I am sorry; I should have said Senator Baxter. Senator Baxter wants more control. It may be necessary at some time, but we have not, I suggest, arrived at that stage yet. Control of banking would be a very serious step and would have to be followed perhaps by many other controls. The Senator has pointed out to us the cheap rate at which short-term borrowing—he did not say short-term, but I think he meant it—was possible in England—at 1? and 1¼ per cent.; but that has not been achieved by taking control of the Bank of England, which is the central bank there. I hope that the setting up of the central bank, the putting in charge of a board of sensible, prudent, experienced men and the power given to that board in the Bill, will have certain important and serious effects on the banking system and on the finances of the country. I do not think it is at all necessary at this stage to go anything like the distance Senator Baxter suggests in the amendment and I do not propose to accept it.

Amendment put and declared lost.
Section 7 agreed to.
The Seanad adjourned at 9.5 p.m. until 10.30 a.m. on Friday, 9th October.
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