The objects of this Bill are to permit the funds of the Post Office Savings Bank to be invested in stocks of local authorities having trustee status and to assist local authorities, out of the Local Loans Fund, in exercising an option to pay off a stock issue on or after the beginning of the redemption period.
Under the law at present, investment of the bank's funds is restricted to Irish and British Government stocks and funds and to securities guaranteed as to principal and interest by the State. It is considered desirable that there should also be power to avail of stock issues of local authorities for investment of moneys of the bank and provision to this end is made in Section 2 of the Bill, the additional power of investment being confined by sub-section (2) to such local stocks as enjoy trustee status.
The object of Section 3 is to facilitate a local authority by the provision of accommodation out of the Local Loans Fund in connection with the redemption of a stock issue on or after the first date at which the stock falls to be redeemed. The general intention is that such accommodation should be on a short-term basis pending flotation of a new stock issue, when conditions are favourable, by the local authority concerned.
While it is reasonable that the Local Loans Fund should not, ordinarily, be available to local authorities as a source of borrowing for the repayment of existing loans, I consider that, where a funding operation in respect of a stock issue is involved, there should be power to assist the local authority in carrying through such an operation, if the necessity arises. This section will permit the Local Loans Fund to be utilised for the purpose. The terms attaching to any loans made will be settled under the general statutory powers applicable to issues out of the fund.
As many Senators are aware, particularly those from Dublin, the Dublin Corporation gave due notice to the holders of nearly £800,000 worth of 5 per cent. stock due for redemption that they intend to redeem it on the 1st of next month. This Bill will enable me to come to the assistance of the corporation in redeeming this stock. The Finance Committee of the corporation have been considering for some time the issue of a new stock to enable them to convert this 5 per cent. stock into one carrying a much smaller rate of interest. The negotiations in connection with the matter were somewhat drawn out owing to the anxiety of the Minister for Local Government and myself that the terms of issue of the new stock would be in line with current interest yields and in keeping with the corporation's strong financial position.
It would be inconvenient for the corporation to float a new long-term loan before the beginning of January but, if this Bill is enacted, I will be in a position, assuming the corporation has not raised the necessary finance from any other source, to have a short-term loan made to them out of the Local Loans Fund on the 1st January, to be utilised for the redemption of the 5 per cent. stock on that date, thus enabling the flotation of a long-term loan to be postponed for a while. When the Bill has been enacted, it will, of course, be permissible for me under Section 2 to invest part of the funds of the Post Office Savings Bank in the long-term loan on its flotation if this is deemed to be desirable.
I would ask the Seanad to support the amendment in the law proposed in this Bill. I ask them to do it so that I will be able to come to the assistance of Dublin Corporation on the 1st January next and in order to enable me to do that it would be necessary and desirable for the Seanad to pass the Bill through all stages in its present session.