I move:
That Seanad Éireann approves the following Order in draft:
State Guarantees Act, 1954 (Amendment of Schedule) (No. 2) Order. 1964,
a copy of which Order in draft has been laid before the House.
Report of Joint Committee on Standing Orders (Private Business). - State Guarantees Act, 1954 (Amendment of Schedule) (No. 2) Order, 1964: Motion of Approval.
The purpose of the Order is to add Aer Lingus Teoranta to the Schedule to the State Guarantees Act, 1954, to enable the Minister for Finance to guarantee borrowings by the company up to a limit of £5,000,000.
The existing legislation in regard to the guaranteeing of borrowing by the air companies is contained in section 75 of the Air Navigation and Transport Act, 1936, as amended by section 3 of the Air Navigation and Transport (No. 2) Act, 1959, and provides that the Minister for Finance may guarantee debentures issued by Aer Rianta up to a limit of £5,000,000. There is no provision for the direct guarantee by the Minister for Finance of borrowings by Aer Lingus.
It is considered that Aer Lingus should be in a position to borrow direct from commercial sources, under the guarantee of the Minister for Finance, moneys required for its own purposes and it is proposed to provide for this and other matters in comprehensive legislation which I hope to introduce later in the year in relation to the air companies. As an interim measure, it is proposed to avail of the machinery of the State Guarantees Act, 1954, to provide the Minister for Finance with the necessary powers of guarantee. I would propose on the enactment of the new legislation to have Aer Lingus Teoranta deleted from the Schedule to the State Guarantees Act.
Aer Lingus has ordered four short-haul jet aircraft, for use mainly on the company's continental services, and these aircraft are due for delivery next Spring. Of the total cost of about £5 million, £2 million will be provided from the Exchequer by way of equity capital. It will be necessary for Aer Lingus in the near future to borrow moneys from commercial sources towards the financing of the purchase of the short-haul jet aircraft and for other capital purposes. Borrowing from commercial sources—provided the terms are reasonable—is to be encouraged as it reduces the demands for loans from the Exchequer. The addition of the company to the Schedule to the State Guarantees Act will facilitate the proposed borrowing as it will enable the borrowings to be guaranteed by the Minister for Finance. The Minister for Finance would, of course, be prepared to give a guarantee only where he is satisfied with the terms of borrowing.
Section 7 of the State Guarantees Act, 1954 requires the Minister for Finance to lay an annual statement before each House of the Oireachtas giving details of each guarantee given by him under the Act and borrowings by Aer Lingus guaranteed by the Minister will be included in the annual statement.
I have not seen this Order, but I gather the idea is to give more powers of borrowing to Aer Lingus—powers to borrow from the commercial banks and other financial sources.
Yes.
The only point I wish to make is that it might be no harm—I happen to have been nominated by the Banks Standing Committee to the Seanad as well as by the Federated Union of Employers —to point out publicly, as the banks very often do not get credit, that the banks give considerable assistance to the State by underwriting loans. It is rather interesting that in this case it is being made apparent to the public that State and semi-State bodies like Aer Lingus do lean on the commercial banks to a considerable extent.
There are people who imagine that the banks do not play a big part in the economic life of the country. Neither are the public aware of the large sums called on to be lent by the commercial banks. Such loans and such financial assistance take away from the amount of money the commercial banks have available for private enterprise, for the entire private sector of the economy. I am not being critical of this motion—in fact, I approve of the powers being given to Aer Lingus to borrow because I think it is a worthy cause—but I am glad to be able to take the opportunity to draw the attention of the public to the help commercial banks give to the Government directly, and to the nation indirectly, in helping State and semi-State bodies in a financial way.
Senator McGuire is right in saying that in regard to our air company, the banks have been of assistance—so have the insurance companies—in providing loans for improvement purposes. The purpose of this Order is to enable the Minister for Finance to guarantee borrowings on a scale not at present possible because, as I have already indicated, under present legislation the Minister for Finance is not enabled to guarantee borrowings from private sources and has been only able to guarantee debentures issued by the company.
The Senator has said the banks have assisted. What does that involve? Are these free loans, or is there a special rate of interest charged on such loans?
The Minister for Finance reviews the terms. The Minister for Finance has to examine the terms under which the air company will borrow before he sanctions a guarantee in the usual way.
Is the rate three per cent, six per cent, 5½ per cent or 6¾ per cent? What do the banks do that is described as very useful work?
The banks act in a purely commercial manner. The rate of interest varies according to the purpose of the loan and the terms of repayment.
Question put and agreed to.