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SELECT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE debate -
Wednesday, 24 Jun 1998

Vol. 1 No. 7

Economic and Monetary Union Bill, 1998: Committee Stage.

I welcome the Minister for Finance and his officials. We are meeting to consider the Committee Stage of the Economic and Monetary Union Bill, 1998. Is it agreed that we conclude consideration of the Bill not later than 4.30 p.m.? Agreed.

For the purpose of debate it has been agreed to group the following amendments together: Nos. 2, 6 and 14; Nos. 7, 8 and 9 and Nos. 11, 12 and 13. Other amendments not listed will be discussed individually.

The first two groupings are correct but amendments Nos. 11, 12 and 13 are distinct. The only commonalty they have is that they all relate to section 26. Can the Chairman advise me why he thought they should be taken together?

I was advised by the Bills Office that these amendments are related and, in line with normal practice, I followed that advice.

I will not object but they are related only in so far as they all arise from section 26. I hope this will not be a precedent and that when stand alone amendments are tabled in other legislation they will not be grouped simply because they happen to relate to the same section.

The Deputy's comments have been noted.

Sections 1 to 3, inclusive, agreed to.
SECTION 4.

I move amendment No. 1:

In page 6, line 6, to delete "section 2" and substitute "section 1(2)".

Deputies will recall that on Second Stage I drew the attention of the House to an error in section 4 and I undertook to bring forward an amendment on Committee Stage to remedy it. The incorrect wording states that every regulation and order made under the Act shall be laid before the Oireachtas, except orders under sections 2 or 15. The reference to section 2 is wrong. It should be changed to section 1(2) which provides for commencement orders which should not arise under section 2.

Amendment agreed to.

Amendments Nos. 2, 6 and 14 are cognate and may be taken together, by agreement.

I move amendment No. 2:

In page 6, lines 7 to 11, to delete all words from an including "if" in line 7, down to and including "accordingly" in line 11 and substitute "regulations under this Act shall have statutory effect but, unless they are confirmed by an Act of the Oireachtas passed within six months after they are made, they shall cease to have statutory effect on the expiration of that period".

These amendments relate to the obligation on the Minister to place regulations before the Houses of the Oireachtas. It is normal for the Minister to deal with matters of detail by way of regulation in a Bill and for them to be laid before the Houses of the Oireachtas before they have the force of law. The Minister used a negative formulation which means he makes the order, it is then placed before the Houses of the Oireachtas and if nobody moves an annulling motion within 21 sitting days the regulations become law. In important legislation such as this, it would be better if the Houses of the Oireachtas positively affirm regulations made by the Minister. This amendment would require the Minister to bring before the House a motion to give the effect of law to his regulations which would provide an opportunity to debate the matter again.

There are a number of far-reaching powers here for the timing of various events which would be laid down in regulation by the Minister. It would be bad practice for this to go through using a negative formulation. There would be advantages if it were done positively. The negative formulation would not work in terms of accountability. I cannot recall any occasion where a Minister introduced regulations and a Member of either House tried to annul them by way of a motion. The accountability which arises from casting the regulations in this way is more apparent than real. In practice, it is just a rubber-stamping by the Oireachtas. The regulation appears on the Order Paper, stays there for a certain period after which it then has the force of law. That is bad practice for important legislation.

We should debate EMU as often as we can between now and the introduction of the coins and notes in the first six months of 2002. One of the problems with EMU will be that the business community and public will find it difficult to adapt, even with the fullest information available. The Houses of the Oireachtas should take every available opportunity to discuss the issue, simply as an exercise in communications.

For example, the Minister can decide to withdraw coins and notes denominated in Irish pounds from circulation by St. Patrick's Day instead of by June 2002 by regulation. He would probably announce in an interview that he proposed to bring the date forward but it would be far more satisfactory if something that important could be debated by the Houses of the Oireachtas. In that way the formalities of procedure would have to be gone through and the Minister would have to explain to the House why he was taking such action.

It will not worry anyone if minor regulations are promulgated in the manner intended under this section. However, there is a very strong case to be made for amending these regulatory sections so that the Minister's regulations can only have the force of law if they are confirmed by the Houses of the Oireachtas and if Members receive sufficient time to debate them. Apart from the accountability aspect and the need to comply with best parliamentary practice, there is the added advantage that the Minister would have a forum to communicate any important decision he intended to make by regulation, particularly the discretion he has given himself to introduce the euro notes and coins and withdraw the punt notes and coins any time between 1 January 2002 and 30 June 2002.

I support Deputy Noonan's approach. The more the House discusses and debates EMU the better. There will be a learning curve in this and it will take the general population some time to become familiar with the transition. There will have to be an education and familiarisation process. If Deputy Noonan's amendment is not to change the nature of the Bill, the Minister should consider accepting it. It is a minor change, which, as Deputy Noonan said, will allow for greater accountability. Perhaps by 2002 Deputy Noonan will be responsible for laying regulations before the House.

The Deputy might as well dream by day as by night.

Nothing is impossible - like Kildare winning last Sunday.

(Interruptions.)

The approach outlined by Deputy Noonan has many advantages. If the Minister and his officials consider the amendment positively they may find a way of including it in the Bill.

Amendments Nos. 2, 6 and 14 refer essentially to the same issue. They propose similar amendments to sections 4, 15 and 29. The power to make an order or orders is provided in sections 1, 9, 10, 11, 15 and 23.

Section 1 provides for commencement orders. These are not usually laid before the Oireachtas. Section 9 provides for the Minister to set by order the date of withdrawal of legal tender status of Irish pound notes and coins. The major import of the comments made by Deputies Noonan and Deenihan relate to that aspect. Section 10 provides for the Minister to designate by order persons who may be obliged to accept more than 50 coins in a single transaction, and by order to revoke or amend orders made under that section.

Section 11 provides for the Minister to set out by order the technical specifications of coins denominated in euros, provided these comply with the harmonised specifications agreed by the Council, and by order to revoke or amend orders made under that section.

Section 15 empowers the Minister to call in coins by order. Section 23 provides that the Minister may by order on such date or dates and under such terms and conditions as he or she determines, redenominate into euros all or part of the outstanding debt issued by or on behalf of the State under Irish law and denominated in Irish pounds. Power to make regulations is provided under section 29 also, which provides that the Minister may make regulations for the purpose of enabling Part II of the Bill to have full effect.

Section 4 deals with the laying of regulations and orders before the Houses of the Oireachtas. It aims to provide inter alia that if within 21 sitting days either House of the Oireachtas passes a regulation annulling the regulation or order made under the Act, other than the commencement order or an order under section 15, the regulation or order will be annulled accordingly. This is a standard provision which gives the Oireachtas an appropriate role in relation to regulations or orders made under the Act.

Section 15 deals with calling in coins. It makes the same provision from the coming into operation and the laying before the Oireachtas of calling in orders as currently applies to such orders under section 12 of the Decimal Currency Act, 1969. In particular, it provides that a calling in order must be made at least six months before the withdrawal date and that if either House of the Oireachtas passes a resolution annulling the order before that date the order will be annulled accordingly.

Section 29 empowers the Minister for Finance to make regulations for enabling Part II of the Bill to have full effect. The provisions of section 4 would apply to any regulations made under section 29.

The provisions of sections 4 and 15 provide adequately for the Oireachtas to take an appropriate role in relation to regulations and orders if either House sees fit to do so. This is especially so, given that the power to make such regulations and orders will, assuming passage of the Bill, already have been vested in the Minister by the Oireachtas.

Deputy Noonan's amendments would require the Oireachtas to pass an Act within six months to include every regulation or order made under the Bill. I could not agree to such a requirement. It would be undesirable, both in principle and in practice.

In principle, it would effectively remove the point of allowing secondary legislation because it would require the passage of primary legislation to cover points which the Oireachtas had otherwise agreed to delegate to ministerial action by way of secondary legislation. In practice, the requirement would tend to generate uncertainty about whether a measure decided by the Minister would be confirmed in primary legislation or would be confirmed in time. Such uncertainty would be particularly inappropriate in a Bill whose aim is to increase certainty for economic agents as we approach EMU and the changeover to the euro, not to generate uncertainty.

By contrast, provisions in the Bill represent an appropriate balance. They allow the Minister to take decisions on certain matters within the parameters laid down by the Oireachtas in the primary legislation and give considerable certainty that such decisions will stand. They also provide for appropriate control by the Oireachtas, in that they allow either House to annul the ministerial regulation or order by a resolution of that House. In other words, they provide for confidence by economic agents in the durability of the Minister's decisions as expressed through regulations or orders, while allowing the Oireachtas to overturn them if that is warranted. In the circumstances, I cannot accept the amendments.

Deputy Noonan made the point that it would be desirable to have more debate on EMU in the period from 1 January 1999 to 1 January 2002, with which I agree. I can see many devices the Oireachtas might use to allow debates on this in that three year period. Depending on how matters are at the time I would have no objections to debates on progress towards monetary union leading to 1 January 2002 or on the decision to withdraw notes and coins. It is impossible to predict now how matters will stand then, but I have no objection in principle to having such debates, as they should lead to greater public awareness.

Monetary union has been debated in the Oireachtas in recent years by sub-committees. The chairman's predecessor, Deputy Jim Mitchell, commented strongly in the Dáil on the lack of media coverage of the affairs of the sub-committee of the Select Committee on Finance and General Affairs in the last Dáil. Many experts gave their opinions to that sub-committee but there was very little media coverage of those meetings. There was a debate on monetary union in this committee last February; in March during the debate on the Central Bank Bill; in the Dáil and Seanad in April and I attended a meeting of the Joint Committee on Small Business and Services yesterday for another debate on monetary union. The topic will also be debated next week in the Seanad.

Deputy Noonan referred to one of the orders which provides that one need not go to 30 June for the withdrawal of notes and coins. Who knows who the Minister for Finance will be in 2002? If it is not me I can think of no better person than Deputy Noonan. Whoever the Minister of Finance will be, if a decision is to be made on coin and note withdrawal during those six months, he or she should signal that in plenty of time to enable debate to take place on the matter. It is not necessary to change the whole principle of giving regulatory powers to the Minister and accept the Deputy's amendments to allow such a debate to take place. The Deputy will be aware of many debates in the Oireachtas over the years about giving Ministers regulatory powers. It has also been a feature of some court cases. For reasons of both principle and practice I cannot accept these amendments.

The Minister will not be surprised to learn that I do not agree with him. He says there is a satisfactory system in place by which the Oireachtas may annul regulations or orders brought in by the Minister. That is the de jure position, but the de facto position is that that power is never exercised. Matters are printed on the back of the Order Paper and only very studious Deputies know that regulations are mentioned there. The calendar starts to run and regulations are introduced. If the Minister thinks there is adequate accountability by the cast of provision in the Act, his officials should be able to quote the precedents for when the Oireachtas annulled or attempted to annul a ministerial order. When did anyone try to do that in recent history?

The Minister said he disagreed with my amendments in principle because they would undermine the whole basis of secondary legislation and the regulatory powers of Ministers to make orders. It does nothing of the sort. My amendments were taken from an Act of the Oireachtas where positive affirmation of ministerial orders is required. The corpus of our law is littered with examples of the positive affirmation formula I am using rather than the annulling formula the Minister is using. I am not undermining any principle.

There are two ways ministerial orders and regulations can be dealt with in Irish law. One is the way the Minister suggests: the passive approach. If the Oireachtas does not annul it, the order becomes law. I propose the alternative, which is found in many recent Acts, whereby the Oireachtas is required to affirm positively rather than passively acquiesce. There is a real distinction in accountability in adopting this formula. Usually, when a choice is made between the passive and active approach the active approach is adopted when the Minister is dealing with matters of consequence rather than matters of detail by way of order. In this Bill, while there are many matters of no great consequence or matters of detail appropriate to regulation, a decision on whether Irish notes and coins should be withdrawn on one date rather than another from 1 January 2002 to 30 June 2002 is more fitted to primary legislation. The Minister is taking a major discretion on himself with regard to legislation which goes to the heart of the transfer to the new currency.

The euro will only become real to citizens when they have it, in notes and coins, in their pockets. By regulation the Minister is suggesting he will be in a position to place an order before the Houses of the Oireachtas, mentioned on the Order Paper, and if nothing happens his date will be the effective one. At the level of principle I do not think that is a good approach because the matter is one of consequence. It should be dealt with by positive affirmation of the ministerial order by resolution of the Houses of the Oireachtas if it is not to be done in primary legislation. At a pragmatic level it would provide the Minister or his successors with a very good opportunity to tell the House that for instance to keep in line with our colleagues in Europe and for other pragmatic reasons the date must change from the end of June to 16 March. It provides the Minister with an opportunity to announce this formally in a parliamentary setting, and if accountability means anything, that is where such announcements should be made. In addition, it would allow the Minister, or his successors, to explain in detail why one date rather than another was being opted for, as well as explaining the system of transfer and the nuts and bolts of that transfer.

The Minister's arguments are demonstrably wrong when he says my amendments would undermine the principle of dividing matters into primary and secondary legislation. Such amendments are in several Acts already and this formula is used extensively. I ask the Minister to reconsider, and I will compromise if he agrees to reflect on this before Report Stage. He should accept the amendment in respect of the powers mentioned in section 9, which provides that notes and coins denominated in Irish pounds or multiples or subdivisions thereof shall retain legal tender status until the 30 June 2002, or such earlier date as the Minister may specify by Order. The Minister needs a little spancel on him there.

In the interest of accountability and communication I will withdraw my amendments if the Minister will accept an amendment along the lines I have suggested to ensure that if he invokes section 9 by order he will explain why to the Oireachtas.

From a procedural point of view the Minister mentioned the advantages of secondary legislation by order or regulation would be obviated, or at least diminished, if he had to explain his intentions to the Oireachtas to get it through. That would not be the case. He would need only speak to a motion of affirmation. It would be a set piece Second Stage type debate where everybody would contribute once. It would not be like Committee Stage where the legislation would be held up. A motion would be proposed, Members would speak to it and it would be either voted on or not.

The final difficulty is that any Opposition spokesperson on Finance will not want to table in the Dáil motions of annulment on regulations made by the Minister for Finance running from this legislation. It would send out all the wrong signals and give the impression that a significant Opposition party was against part of the process towards the euro, which it is not. The Opposition would be put in a false position if it were to act under the regulatory provisions here. A motion annulling orders would have to be tabled. What type of signal would be sent out internationally to the markets? What the Minister is providing in terms of accountability is inoperable and, with respect, I ask that he reflect on this to see if my concerns about section 9 can be met.

I cannot give a date in recent history when an annulling order was laid before or carried by the House. Perhaps it happened but I have no recollection of it.

The Deputy's amendment No. 2 states ". . . regulations under this Act shall have statutory effect but, unless they are confirmed by an Act of the Oireachtas passed within six months after they are made. . . ". An Act of the Oireachtas would mean a new Bill; not an annulling motion. Part of the Deputy's argument refers to an annulling order of the Dáil but the amendment is at variance with that as it requires a new Act of the Oireachtas which would be new primary legislation. Perhaps the matter can be cleared up in debate.

On section 9, if the Minister for Finance of the day decided to shorten the period and not have the full six months from 1 January to 1 July and take the power to withdraw full notes and coins, say, by St. Patrick's Day 2002 it would not be a secret announcement. It would be done after consultation with a wide variety of institutions, trade associations, businesses and so on.

I accept the Deputy's point with regard to section 9 that the last day Irish notes and coins will exist, is a major issue not only in regard to the economics of the State but also in regard to the history of the State. I will try to come up with a suitable amendment to section 9 before Report Stage.

The Minister has now agreed that the matter is of such import that there will be widespread consultation with businesses, trade associations and so on. When it comes to accountability, the Minister will consult with everybody except the national Parliament. That is anomalous?

That is a fair point.

The Minister is correct in saying my amendments use the formula that regulations shall be law but have to be confirmed by an Act of the Oireachtas in a specific period. I am willing to withdraw all my amendments - I tabled many of them for the purpose of debating this issue - if the Minister will examine section 9 and produce an amendment requiring the Minister of the day to confirm the order, not by way of an Act, but by way of Dáil motion. There are several ready-made formulas in legislation and the parliamentary draftsman's office would provide them very quickly. There would not be drafting problems. On the basis of the Minister's commitment I will withdraw my three amendments.

I understand what the Deputy has in mind and also that the purpose of Opposition amendments is to have debate. What the Deputy means by an act of the Oireachtas is an action by the Oireachtas.

Here it means an Act of the Oireachtas but in terms of the Minister conceding on section 9 and readjusting the position, a motion will suffice.

Between now and Report Stage, tomorrow, I propose to include in section 9 that if the Minister were to take the power to shorten the time a motion would have to be brought before the House. It is a good point. All Ministers, including myself, make great announcements everywhere from fairs to football matches but not in the Houses of the Oireachtas too often. I take the Deputy's point that the Oireachtas should be consulted about such changes. Between now and tomorrow I will see what changes can be made to section 9 to take account of the Deputy's comments.

Amendment, by leave, withdrawn.
Section 4, as amended, agreed to.
Sections 5 and 6 agreed to.
SECTION 7.
Question proposed: "That section 7 stand part of the Bill."

Section 7 confirms that contracts may be denominated in euro during the transitional period by virtue of Council regulation 974 of 1998, despite the fact that euro notes and coins will not be in circulation. On 1 January 1999 the euro will be the currency of the State but will not be available in legal tender form. This means euro notes and coins will not be available until 1 January 2002. Section 25 of the Central Bank Act, 1989 requires that contracts be either in legal tender or in a currency other than the currency of the State. Section 7 overrides section 25 of the 1989 Act.

Question put and agreed to.
SECTION 8.
Question proposed: "That section 8 stand part of the Bill."

I take it the earlier operative date is a date earlier than the last day of June 2002?

Exactly. The earlier operative date defined here, and used in Chapter 3, is the reference and meaning assigned by section 9. Briefly, legal tender status must be withdrawn from Irish notes and coins by 30 June 2002 at the latest. Section 9 empowers the Minister for Finance to set an earlier date by order, and when set it will be the earlier operative date defined here and used on a number of occasions in Chapter 3.

Has the Minister any comment on the convergence of economists lecturing us about the timing of this issue, that it could not be worse and leaves us without any instrument in an economy where there is incipient inflation and so on? I am sure the Minister is as familiar with the arguments as I am but Committee Stage of the Bill ought to be taken as an opportunity by the Minister to comment on quite a crescendo which is building up among certain economists who have platforms available to set out their views on this issue.

If the Deputy looks back over the past six years of this debate he will see the same group of economists have opposed the concept from day one. I do not dispute their right to oppose it, but this was debated a long time ago. They put forward a number of reasons for not joining monetary union and were against the concept in principle. A survey of all economists practising in Ireland would find a clear majority against the concept from the start. This debate has been taking place here and in Europe over a long period. I know of only a couple of economists in Ireland who have said from the start that it is a good idea. Apart from opposition to Ireland's participation in monetary union, groups of economists have been opposed to the principle of economic and monetary union for some time. They have cogently set out why a single currency is a bad idea and books have been written on the subject. However, the debate is over.

Deputy Noonan said economists have been pillorying the idea for some time, and had said that it should not have gone ahead, that it is a political ideal which should not have been taken on board. While not dismissing economists, Deputy Noonan accepted EMU is a political ideal and said surely politicians should make the final decision on it. Deputy Noonan's argument was powerful at the time, but since then, when many economists were against the idea, economists' arguments have moved in various directions. They began by saying the entire concept was bad and then, when in 1992 Ireland decided to join, said Ireland should not join even though monetary union will go ahead. The proponents of this argument divided into two further categories one of which argued that Ireland should not join in the event of the UK not joining as we are too dependant on the UK economy and the UK forms too large a market for us. When asked why we should not join in the absence of the UK it was argued that sterling, which would be outside the common currency, would have the freedom to move up and down against our currency. It was stated the danger was that the movement would result in the punt appreciating up to a value of £1.20 against sterling resulting in exporters to the UK going bust as happened in 1992 and 1993 when the punt had a value of £1.09 or £1.10 against sterling. It was argued that sterling would depreciate. This argument got a great run for years. The ESRI examined this model to see what would happen the economy in such an eventuality. Various figures were put forward on the expected loss of employment if sterling fell dramatically as it did in 1992-3. The debate got powerful commentary in the media and was put forward as the main reason Ireland should not join monetary union.

In the past year, sterling has gone in the opposite direction to that predicted.

This is a quite interesting subject, but we should return to the nitty gritty.

The British pound went in the opposite direction and the group of economists which argued against entering monetary union because the UK would not join and the punt would appreciate, now argue, having been found wrong in the initial argument, that we should not join as to do so would import inflation to the economy resulting in it being uncompetitive.

I do not subscribe to any of the extremes of the debate. We know it will not be plain sailing from 1 January 2002. However, this and previous administrations decided it was in the best interests of the economy in the longer term to be among the first wave of participating countries. We have made our bed and will lie in it.

We cannot have a general debate.

I do not wish to weary the Chairman or have a general debate. However, it is not unusual to ask questions on a section which relates to an earlier operative date. It is unusual not to be able to raise a substantive question on Committee Stage of such an important Bill.

I have no objection to anybody raising a question.

I posed a question in the context of the recent emphasis on the new inflation figures, and the prospect of fairly serious inflation being projected by some economists and their argument that our business cycle is at a different stage from that of other economies. It is on this peg that economists are now hanging their arguments.

I am glad the Deputy raised the issue of all economies being in synch, an argument posed by economists. Talking about economies being in synch is like saying I will definitely win the lotto next Saturday or that the three pears on slot machines will line up together. It will not happen. It is based on a fundamental disagreement between economists and politicians as to whether the concept of monetary union is good. Economists lost this debate which can be traced back a number of years. The generality of economists oppose monetary union and have moved to the issues raised by Deputy Rabbitte.

Economists who have lost the debate should accept monetary union will happen and we must make the best of it, something some economists have decided to do. It is ridiculous nonsense to talk about all economies being in line. It will never happen.

What are the current projections for inflation?

In the middle of next month the Department of Finance will carry out its usual mid-term review and will announce the figures and a reassessment of inflation.

The figure is 2.7 per cent.

Question put and agreed to.
SECTION 9.
Question proposed: "That section 9 stand part of the Bill."

I thank the Minister for his commitment to consider an amendment along the lines already discussed. Section 9 effectively gives the Minister the opportunity to bring the operative date forward from June to any time in the spring or early summer of 2002. The rate at which people get their notes and coins will be 2.48, which is what the Minister announced in March when the monetary committee met in Europe. Since then the markets, as the Minister is aware, are trading at around 2.52, approximately four phennigs above the rate of entry.

Last week the Taoiseach said something peculiar which gave rise to speculation. He spoke about inflation and of fixing the rate in the second half of the year. Mark Hennessy, an eminent political correspondent with The Examiner, reported the phrase used by the Taoiseach and some commentators said that because there is inflation in the system, perhaps the Government is thinking of another revaluation with an entry at the current market value, which would have the effect of hardening the currency. Is this type of thinking still current in Government or is 2.48 the fixed rate?

There are two angles to Deputy Noonan's question and comments. The technical reason for a rate of 2.5170 or 2.5180 relates totally to the differential in the interest rates between the Irish pound and the deutschmark. Between now and 1 January the rate will work out at 2.48338. If there was a difference, people would be in the market making money. It will converge at 2.48338, the rate agreed in March.

The Deputy referred to what the Taoiseach said last week. I was not aware he made a comment in this regard but he said the rate would be fixed on 1 January, he is correct. On the first weekend in May, there was a reaffirmation of the decision made in the middle of March. We announced in Monsdorf at the informal ECOFIN last September that there would be what is termed a "preannouncement of the bilateral exchange rates" and the method that would be used in the first weekend in May.

We took the opportunity in March to reset the Irish central rate. That was important because the Irish pound was the only currency trading outside its central rate for some time, although it had reduced in value considerably. The old central rate was 2.41105. We took the opportunity to revalue by 3 per cent and set a new central rate. Subject to the infallibility of my memory, the communiqué issued that weekend said this would be the rate for all currencies. On the first weekend in May, there was a preannouncement of the bilateral exchange rates.

The Taoiseach is correct in that the rate will not be set until midnight on 31 December when there will be a seamless transfer between the euro and the ECU. There must be a one for one conversion rate between the euro and ECU. The ECU is a notional currency - a basket of currencies - and includes currencies, such as sterling, which are not among the 11. The ECU rate is about 0.79.

Since March there has been no volatility on the currency markets because they have accepted what the rate will be. Legally and theoretically, the rate will not be set until that date, so the Taoiseach is correct.

Is it agreed that Deputy Dennehy take the Chair? Agreed.

Legally, the rate has not been fixed. On the first weekend of May, there was a preannouncement of the position. Both the arguments are correct.

On the Deputy's final point, which is important from a political and an economic viewpoint, there was no debate in Government on a change in the central rate of the Irish pound.

I thank the Minister for making that clear. What the Taoiseach said is correct, but it is being interpreted in the markets as an indication that what we thought was fixed is not fixed. As we are losing control over monetary and interest rate policy, which may have a further impact on inflation in so far as we no longer have policy levers, except fiscal levers to reverse inflationary trends to any great extent, it was thought the Government would have one last opportunity to harden a little against sterling so that inflation imported through a weak Irish pound exchange rate with sterling would be cancelled to some extent. I take it there is no truth in that line of thought.

To some extent I have broken the monk-like silence I imposed on myself since I became Minister for Finance about not speaking about currencies, even in the few comments I made to the Deputy on this matter. I did not read the comment in The Examiner, a newspaper I read every day. I was out of the country one day last week and, perhaps, I missed it. There is speculation among economists on the point the Deputy made about the issue. I did not realise they were interpreting comments the Taoiseach said on the matter. They are definitely based on a false premise. Recently, another politician commented on inflation and on the strength of the Irish pound against sterling, as if the revaluation or the set rate had any effect on it in the earlier part of the year. This view is wrong in that the central rate of the Irish pound was set against the deutschmark. The activities of sterling were totally unrelated to that matter.

Sterling appreciated against the deutschmark for different reasons. The reason the Irish pound decreased in value against the deutschmark was that people thought the Irish Government would not go in at the spot rates of the markets which were as high as 2.67 to 2.72, although that was a long way from the old central rate of 2.41105. There is much ignorance about this matter, even among some economists. The Irish pound traded at around 2.4105 against the deutschmark in 1993, 1994 and 1995. If I remember correctly, it traded as low as 2.29 or 2.30 against the Deutschmark during that period. The average rate was about 2.4105.

In early 1997, sterling started to take off. From May 1995 the value of sterling against the deutschmark was as low as 2.1775 and went as high as 3.09 to 3.010 in the early part of this year. That pulled up the Irish pound. The fact the markets realised the Government had no intention of going in on a spot rate had an effect. Some politician has been confusing matters and is not ad idem with the facts.

Question put and agreed to.
SECTION 10.
Question proposed: "That section 10 stand part of the Bill."

The section states that nobody would be obliged to accept more than 50 coins denominated in euro or in cents in any single transaction. Is that bringing forward a provision already in law in respect of Irish punts?

I am also interested in this matter. Section 10 provides that no person other than the Central Bank of Ireland, and such persons as may be designated by the Minister by order, will be obliged to accept more than 50 coins in any single transaction. The limit of 50 is set out in the legal framework for the euro. This section also provides for the repeal, from the date of withdrawal of legal tender status from Irish pound notes and coins, of sections 8, 9 and 10 of the Decimal Currency Act, 1969, and section 15 of the Decimal Currency Act, 1970. Those sections set out limits to the amount of Irish pound coins which must be accepted as legal tender.

Article 11 of Council Regulation 974 of 1998 on the introduction of the euro states, inter alia, that except for the issuing authority and those persons specifically designated by the national legislation of the issuing member state, no party shall be obliged to accept more than 50 coins in any single payment and that is being transposed into our legislation.

As the Central Bank issues notes and coins on the Minister's behalf, subsection (1) treats the Central Bank as the issuing authority. It also empowers the Minister for Finance to designate by order other persons who will be obliged to accept more than 50 coins in a single payment. Once legal tender status has been withdrawn from Irish pound notes and coins, the obligation to accept up to 50 euro coins will be a general obligation throughout the economy, with only the Central Bank and those designated by the Minister for Finance having to accept more than 50 coins in any single payment.

The present rules do not apply to anyone - for example, banks - who takes an amount of coins greater than the legal tender rules.

At present there is no obligation on any person, including the Central Bank, to accept an amount of coins greater than that provided for in sections 8, 9 and 10 of the Decimal Currency Act, 1969 and section 15 of the Decimal Currency Act, 1970.

Section 8 of the Decimal Currency Act, 1969, provides that each denomination of coin issued under the Act is legal tender only for payment on an amount not exceeding 20 times its face value. Sections 9 and 10 of the same Act apply the same limit to 50p and 10p coins issued before decimal day, which was 15 February 1971. Section 15 of the Decimal Currency Act, 1970, limits the legal tender status of different combinations of bronze coins and of coins other than bronze coins to a specified limit which have effect, notwithstanding section 8 of the Decimal Currency Act, 1969. On the date of withdrawal of legal tender status of Irish pound notes and coins, a limit of 50 coins in euro will be the only applicable limit as regards the amount of coins which constitute legal tender for a single payment. This, therefore, proposes that sections 8, 9 and 10 of the Decimal Currency Act, 1969, and section 15 of the Decimal Currency Act, 1970, be repealed from that date.

I understand the Minister's remarks, but I wish to explore the matter further. Section 10(1) states:

No person, other than the Central Bank of Ireland and such persons as may be designated by the Minister by order, shall be obliged to accept more than 50 coins denominated in euro or in cent in any single transaction.

What is meant by the persons designated by the Minister by order? Does it mean the clearing banks?

I have no proposals to designate any person other than the Central Bank.

The Minister referred to the decimal currency Acts and the provisions that would not make it a requirement on anybody to accept a certain number of coins in respect of settling an account.

I was unaware of that restriction.

The restriction set out in this Bill is in respect of the settlement of an account or the payment of a bill; it refers to any single transaction. This could mean that if a person presents a bank with a bag of coins there is no legal obligation on the bank to accept more than 50 coins. Some businesses, such as small shops, use many coins. In such instances they would be engaged in a transaction, not a settlement of an account. Will this create a legal position where the banks need only accept coinage at their discretion? If this arises it will affect bank charges.

I recall there is no obligation at present on any person, including the Central Bank, to accept an amount of coins greater than that provided for under sections 6, 8, 9 and 10 of the Decimal Currency Act, 1969 and section 15 of the Decimal Currency Act, 1970. I am unaware of any case where the banks have refused to do so. However, hitherto, I was also unaware that there has been no such requirement. This section transfers into Irish law the provisions of the relevant EU regulation.

Will the Minister provide the background to this section on Report Stage? What is meant by "transactions"? I have always understood there to be a limit on the number of coins that could be used in a transaction, but that things such as the payment of fines in court are not deemed to be financial.

The Minister referred to 20 times the face value. I understand that to mean 20 coins, which would mean, for example, that 20 10p or 20 50p coins would be legal tender. However, given that 50 cents will be the equivalent of 35p, is it proposed, for example, that a child with a piggy bank could not lodge anything over 35p? If these aspects became public knowledge the new currency could become the subject of ridicule. I would not have a problem if it was provided that 50 coins denominated in the euro would be accepted. That would be the equivalent of £35. However, a provision regarding 50 cents will create difficulties. Why is this restriction being proposed?

It was agreed in the relevant EU regulation, which is now being transposed into Irish law. I will elaborate on the matter on Report Stage.

I can see the need for limits. Nobody should be obliged to accept payment in pennies. However, the banks are different. The problems could be overcome if they were designated along with the Central Bank to the effect that they will be obliged to accept coins tendered at the counter. Will the Minster will clarify the matter on Report Stage.

With regard to the Minister's image of one armed bandits, if one is lucky to hit the jackpot and it is presented in coins what happens if the transaction exceeds 50 coins?

Recipients can take whatever number of coins they wish, but the law only obliges them to take 50.

Would there be a restriction on the owner of the machine to limit the payout to 50 coins?

I do not think so.

There are logical reasons for limiting the number of coins in transactions, especially in cases where people may deal in coins for vindictive reasons. Another reason for the provision is to prevent coins from being taken out of circulation for long periods. For example, yesterday I saw £50 in bronze coins being exchanged. However, there should be provision regarding the banks. At present they make a charge for some of these transactions. For example, they weigh the coinage and charge a percentage. Although matters could be brought to extremes there are good practical reasons for imposing restrictions on the number of coins that may be used in transactions.

Question put and agreed to.
SECTION 11.
Question proposed: "That section 11 stand part of the Bill."

The new coin will obviously be legal tender in Ireland and will bear an Irish emblem. Will there be a legal obligation on other member states to accept coins with our emblems on them?

The coins will all have a common face on one side and on the reverse side will bear the 12 stars, Éire, the harp and the date.

So other countries will be legally required to accept them?

Yes. Likewise, other countries' coins will be legal tender here. The coins will be the same size; the only difference will be in the emblems on the reverse sides.

The issuance of coins will be a very expensive process. Will the Minister give the committee some indication what costs will be incurred by the banking system and, ultimately, by Irish consumers in this regard? Will the intrinsic value of the metal in the euro cent, be it bronze, nickel or otherwise, be greater than the face value of the coin and at what point will the cost of producing a coin be greater than the value of its denominations?

I will attempt to obtain that information for the Deputy. I recall numerous discussions at ECOFIN on what the make-up of the coins would be. We have some information on the cost associated with the provision of coins but it is not really possible to give an accurate figure of what will be involved in replacing Irish coins with euro ones. The largest factor in the replacement of coins is the price of new materials and that will depend on commodity prices in the coming years. A reliable estimate cannot be made at this point. Based on current market prices, the cost of new materials would be of the order of £20-25 million although this does not make allowance for the value of the scrap metal from the old coins. In addition, significant costs will also be involved in the distribution of euro coins and the withdrawal of Irish ones. While this issue is being examined as part of the Central Bank's planning for the changeover process, it is still too early to develop realistic estimates of the costs involved.

The old coins will be taken out of circulation through the banks. Will the banks be paid a fee by the Central Bank for this or will they do it free of charge?

Such logistical questions are being discussed at present. In a reply to a recent parliamentary question, I pointed out that the introduction of the euro was a major logistical exercise for the Central Bank, particularly in regard to the production and storage of coins. Prior to decimalisation, Defence Forces facilities were used for these purposes and I presume they will be used again in this instance as there will be major security implications involved. The new coins, of which there will be millions, will be put into circulation on 1 January and existing coins must be hoovered up in the six months prior to that. The Central Bank is currently working on those logistics.

Were the banks paid a fee for their involvement in the decimalisation changeover? I am sure the same principle would apply in this case as did then.

That was a much smaller operation; I am unable to say whether a fee was paid to the banks in that instance but I do not think one was.

If a fee is payable, the public should be made aware of that.

My official tells me that only halfpennies and pennies were withdrawn in the initial stages of decimalisation while the two shilling coin remained in circulation for quite some time. In comparison, the introduction of the euro is an enormous operation in that all coins will be taken out of circulation.

Does the Minister have a view on whether the Central Bank should pay the banks for this operation? If the banks are paid by the Central Bank, the costs will be borne by the Exchequer but if they are not, the costs will be borne by the banks and, ultimately, passed on to the customers.

Section 13 states that all expenses for the provision of coins denominated in euro or in cent and provided under section 11 shall be defrayed out of a general fund of the Central Bank.

The Central Bank will bear its own costs but I disagree with Deputy Fleming that the costs to banks should be reimbursed by the Central Bank.

Question put and agreed to.
SECTION 12.

I move amendment No. 3:

In page 8, line 27, after "thereon." to insert the following:

"(2) This section shall not apply to tokens of coin-like dimensions and design made or issued for the sole purpose of use in machines or appliances for the purpose of vending goods or services.".

This section makes it illegal for any piece of metal or mixed metal of any purported nominal face value whatsoever to be made or issued in the State as a coin or token for money or as purporting that the holder thereof is entitled to demand any value denoted thereon. That is a sensible provision. However, I recall when I first visited France many years ago, it was necessary to buy a jeton, or token, if one wished to use a payphone. The system had two advantages; first, the price of calls could be varied without changing the machine. Second, it was effective from a security point of view; there was no point in robbing the machine as the jetons could not be used as legal tender.

Many vending machines, some public phones, car park payment machines and so on are coin activated. When one goes to the supermarket, one must insert a £1 coin into a trolley to release it. Parking meters also entail the use of coins. It seems to me that a sensible case could be made for a token system whereby one could purchase tokens for many of these activities at a kiosk. A strong case should be made that this be done for a transition period, especially when every supermarket trolley, parking meter and so on must be adjusted to conform to a euro coin denomination. As the section stands, it seems it would be illegal to use a token system and I tabled the amendment to draw attention to this. Huge problems will occur in the conversion of vending machines, parking meters and so on to meet the requirements of a coin or coins of unknown dimensions. We do not know whether the coin denominations will be suitable for the charges one would wish to impose or whether it would be necessary to alter prices. There will almost certainly be a rounding off of prices in regard to vending machines and so on. By ruling all pieces of metal or tokens of any kind as illegal, is the Bill creating a gap.

Section 12 amends section 14 of the Decimal Currency Act, 1969, to cover euro coins and commemorative coins issued under the Bill, both to extend the prohibition on counterfeiting and to protect such coins. Otherwise section 14 of the Decimal Currency Act, 1969, would appear to prohibit the making or issuing of such coins. The purpose of section 14 of the Decimal Currency Act, 1969, is to inhibit the making of counterfeit coins. It is not intended to prohibit the making of such tokens as those to which amendment No. 3 refers and has not done so since the Decimal Currency Act, 1969. Where it indicates in law the distinctive quality of money, it prevents tokens being issued which purport to be money. Deputy Noonan's amendment could distract from this essential distinction and I do not propose to accept it.

This section relates to money and the point made regarding tokens may be a matter which could be the subject of another Bill. People are increasingly using electronic means for financial transactions and moving away from coins and tokens. This section deals with coins and I do not want to extend it to deal with tokens.

Is the Minister saying that coin-like tokens will not be illegal under this section?

Section 12(1) states "no piece of metal or mixed metal of any purported nominal face value whatsoever shall be made or issued in the State as a coin or as a token for money or as purporting (whether expressly or by implication) that the holder thereof is entitled to demand any value noted thereon.". Coins have a face value, tokens do not.

The coin used to unlock supermarket trolleys is given back upon the trolley's return. If the supermarket does not want to convert that locking mechanism and decides that the easy way of dealing with the matter is to sell tokens at the door would that be illegal?

The new tokens would have no face value.

It would have face value. If the supermarket states that a token to the value of a euro is needed to activate the mechanism, it would have a face value.

It will not be stamped as equivalent to one euro. It will have no monetary value as far as the State is concerned.

I accept that but tokens for money are expressly ruled out. What I am referring to would be a token for money.

We are banning pieces of metal or mixed metal of any purported nominal face value.

Is the Minister saying it has to have a fixed face value to be prohibited?

The token will not have a face value on it.

It might.

Section 12(1) prohibits that.

There will be some print on it, such as advertising for the shop.

It would be not treated as coinage in that case.

If the Minister assures me the section is correct, I am happy.

Amendment, by leave, withdrawn.
Sections 12 and 13 agreed to.
SECTION 14.
Question proposed: "That section 14 stand part of the Bill."

Section 14 provides for paying into the general fund of the Central Bank the proceeds of issue of euro coins issued under section 11. A similar provision applies to the issuance of IR£ denominated coins by virtue of section 7 of the Decimal Currency Act, 1969.

Section 7 of the Decimal Currency Act, 1969, states that the proceeds of every issue of coins provided under sections 3 or 4 of that Act shall be paid into the general fund of the Central Bank and carried therein into the credited currency reserve. This section also applies to coins issued under the Decimal Currency Act, 1990. The purpose of section 14 of the Bill is to make provision for paying into the general fund of the Central Bank the proceeds of the issue of euro coins as already provided for in relation to the proceeds of issue of IR£ coins.

When the Minister talks about the general fund of the Central Bank, is that the European Central Bank or the Central Bank of Ireland? What size of a fund is the Central Bank of Ireland allowed to keep for its own activity?

This issue is not related to this section. When the European Central Bank is set up the Central Bank of Ireland will make two payments to it, one for share capital estimated to be around £35 million and a second contribution to the reserves of the European Central Bank. The amount is worked out by examination of GDP and reserves and could be £350 million. Those reserves will be set aside in the Central Bank of Ireland as European Central Bank reserves. Effectively two payments are made.

What happens if that account goes into deficit ?

The question of what will happen to the Central Bank of Ireland's reserves was raised in the Dáil. It has two reserves - the currency reserve and the accumulated profit reserve. It held more than IR£1 billion so there will be unfettered reserves. Deputy Noonan asked a Parliamentary Question about what the Government will do with the reserves in the long-term and was told the Minister would not make an immediate decision on that matter until he saw how things progressed. There will be a sizeable amount money left after the adjustments are made but the final decision is for another day. Question put and agreed to. Amendment No. 4 not moved.

SECTION 15.

I move amendment No. 5:

In page 9, subsection (3)(a), line 12, to delete "of its making" and substitute "on which the order is laid before each House of the Oireachtas".

The Minister is required under this section to bring in an order for the operation on a date not earlier than six months after the date "of its making". The requirement on the Minister to lay orders before the Houses of the Oireachtas is "as soon as may be" which means whenever the Minister feels like bringing them. There is no compulsion underpinning that phrase. When I was in the Department of Justice I saw orders which had not been issued for 18 months and they were still interpreted as "as soon as may be". There is no compulsion on the Minister to underpin the phrase "as soon as may be". I want a definite starting point to the six months' requirement on the Minister. I am substituting the date of the making of the order with the date on which the order is laid before the House; in other words, the six months should start from the time the Houses of the Oireachtas are informed that the Minister is proceeding by way of order. If it is "the date of its making", the Minister need not bring it before the Houses of the Oireachtas for four months which is a shorter period.

Things happen in the Department of Justice, Equality and Law Reform do not happen in the Department of Finance.

Perhaps there should be a FÁS course for civil servants.

Section 15(3)(a) provides that orders calling in coinage should give at least six months' notice from the date of making the order before the order goes into operation. In doing this, it follows provisions of section 12 of the Decimal Currency Act, 1969. Amendment No. 5 proposes that the period of notice should begin from the date on which the order is laid before each House of the Oireachtas rather than the date of its making. The date of the making of the order is evident from the order itself so there is a known and certain date. On the other hand, the date on which the order is laid before the Houses of the Oireachtas is not necessarily known or certain when the order is being made and will hardly be evident from the order. It follows that such a change would have the potential to cause uncertainty as to the date on which the coins would be called in.

I accept that. This is not a perfect amendment; therefore if the Minister could table a better one to meet my needs I would accept it. There is a valid point, that if the Minister or one of his successors makes an order which is not promulgated, the six months' notice which the Minister intends for the call in of coins will not operate in practice. There will be no public notification of the order being made but several months later, the Minister will bring it before the Houses of the Oireachtas.

The calling in of notes and coins will be a public act, so that is not a genuine criticism. I see the merits of the Deputy's argument but I cannot accept his amendment. I will examine it again before Report Stage but I do not think it is necessary. As the Deputy knows from being a Minister in various Governments, an order applies from the date on which it is signed. It is not possible to specify a certain date for laying it before the Houses of the Oireachtas because of holidays, etc., whereas the making of the order is a public act about which there is certainty. The disadvantage of the Deputy's proposal is the uncertainty it might create regarding what date it would be laid before the Houses of the Oireachtas.

I accept the Minister's point but my argument is also valid. I want to avoid a situation where the orders are prepared and given to the Minister who signs them, but they are not promulgated. Does "the date of its making" mean promulgation and publication of the order or the date of signature from a technical point of view? If it is the date of signature, it could be within the departmental system for good reasons for several weeks and for reasons of omission for a considerable period. The purpose of the section is to give public notice of six months duration for the withdrawal of coins. I want the period to remain at six months and I do not want it to be made shorter because there is a misunderstanding about what the making of the order means. If the Minister is talking about the publication of the order, I do not have a problem with it as long as it is brought to public notice. However, the difficulty arises if the Minister signs it but it does not come out for a couple of months and the six months notification is negatived.

Section 15(3)(b) states that the "order shall be laid before each House of the Oireachtas as soon as may be after it is made". I see merit in the Deputy's argument and I will consider the matter further before Report Stage.

I am looking for something on the record of the House which states that the six months will run and that the day of the making of the order is the day of the public communication of that fact. I want to preserve the six months notification.

I will see what can be done before Report Stage.

I will withdraw my amendment on the basis of what the Minister has said. I want the Minister to table an amendment on Report Stage which meets my needs or, if he thinks an amendment is not necessary, to explain why in an easily understandable way.

As regards calling in coins, Ireland will have a difficulty which no other country will have because the 1p, 2p and 5p Irish and sterling coins are interchangeable; one can walk into a shop and be given 1p, 2p or 5p sterling coins as part of their change. The provision dealing with the withdrawal of certain denominations does not include sterling coins. What will happen sterling coins in circulation in Ireland? Will anyone be obliged to accept them? Will they be dead money in the pockets of people and shopkeepers? If they are not withdrawn, does this mean sterling is joining EMU through the back door?

Sterling coins are not legal tender.

I know, but they are being used every day.

It will be obvious to everyone once the euro comes in.

It should be noted that Ireland will have difficulty calling in coins because Irish and sterling coins are interchangeable.

Amendment, by leave, withdrawn.
Amendment No. 6 not moved.
Question proposed: "That section 15 stand part of the Bill."

As regards Deputy Fleming's point and our earlier discussion about the 50 coin rule, has the Minister ensured that when coins are withdrawn from circulation and people go to the bank to exchange them they are not caught on the 50 coin rule?

Under the Decimal Currency Act, 1969, banks are not obliged to take any more than 50 coins in a single transaction.

Once the Minister announces a call in date for coins, every child in the country will shake out their piggy bank and people will sweep the floor under the bed for coins which will be taken to the bank to be changed into euro. Large amounts of coinage will also be taken to the banks by shopkeepers and others. Has the Minister ensured under this legislation that banks are required to accept and exchange coins or will banks be able to say they are only obliged to take 50 coins in one transaction?

As happened in the past, there is little doubt that the banks will accept whatever number of coins are presented to them. I do not think there is a section in the Bill which obliges them to do so. The logistics of the changeover, about which I spoke earlier in reply to Deputy Fleming, will be discussed. I am sure the retail banks and financial institutions will agree on this matter.

This is ridiculous. The most important currency decision since the foundation of the State is about the take place. At some point in the first half of the year 2002 the Minister will make an order recalling Irish coinage and introducing euros. At the same time if a person goes into a bank with a sack of coins there is no legal obligation on the bank to exchange those coins for euros. I accept that there is goodwill on the part of the banks and that under normal circumstances they will take sums in excess of 50 coins. However, we are facing into the withdrawal of a currency and its replacement by another in circumstances where the only legal obligation on banks is to accept 50 coins or less. If the right of the person to exchange the coinage up to any level or any number of coins is not underpinned in law, the Minister should demand that banks do so.

We are talking about two different concepts; first, what is accepted as legal tender and second, the redemption of coins. Legal tender is the matter we are debating now and another section deals with the total number of coins that can be accepted as legal tender. The redemption of coins is a separate matter and is dealt with in section 16. Under that section the Central Bank must deal with the coin issue. We are getting a little confused. The redemption of coins is covered in section 16. The Central Bank will make regulations with the retail banks stating that all coins are being redeemed and the banks will be obliged to do this. The confusion has been between the definition of legal tender and the redemption of coins. These are two distinct operations.

I accept that point. However, when Deputy Fleming raised a valid point about sterling coins the Minister told him that that was mission impossible as sterling was not legal tender. Any confusion between the issues of legal tender and the exchange of coins was caused by the Minister. Can he now give comfort to Deputy Fleming that the Central Bank will also make provision for the exchange of sterling coins which are in circulation but are not legal tender?

Sterling is not legal tender and therefore, the Central Bank is not obliged to do anything about it.

The Minister said that the legal tender status was not the issue.

No, the point I made was that if a person arrived in a bank with a large amount of coins the question arose as to whether the bank would have to accept the coins. The bank is not obliged to take them if they are part of a normal transaction. However, if the person wishes to have to coins redeemed on foot of the recalling of the coins, the bank would be obliged to do so under section 16. The coins can be redeemed.

Question put and agreed to.
SECTION 16.

Amendment No. 7 is in the name of Deputy McDowell. Amendment No. 8 is related and amendment No. 9 is an alternate to amendment No. 8. Deputy McDowell is not here and has not nominated anyone to move the amendment.

Amendment No. 7 not moved.

I move amendment No. 8:

In page 9, line 34, to delete "this Act" and substitute "the Economic and Monetary Union Act, 1998".

Section 16 substitutes a new section for section 11 of the Decimal Currency Act, 1969. That section provides that the Central Bank may redeem coins issued under that or earlier Acts, namely, coins denominated in Irish pounds. The new section will retain the Central Bank's existing power and extend it to allow the bank to redeem coins issued under this Bill, namely, coins denominated in euros, commemorative coins and euro coins issued by other participating member states which will be legal tender in Ireland.

Amendment No. 7 proposes to add the words "within the meaning of section 15 of "the Economic and Monetary Union Act, 1998," after the words "repealed enactments" in section 16. Section 16 amends the Decimal Currency Act, 1969, by substituting a new section for section 11 of that Act. Because it is a substitution to that Act the new section must be read as part of that Act. Section 1(2) of that Act already sets out how references in that Act to coins issued under the repeal enactments are to be construed.

Deputy McDowell had proposed amendment No. 9 to make clear what Act was referred to in section 16(d). I am advised that the best way of doing so is to replace the words "this Act" with "the Economic and Monetary Union Act, 1998". Thus I have proposed amendment No. 8 which would resolve the matter. I am grateful to Deputy McDowell for raising this matter.

Amendment agreed to.
Amendment No. 9 not moved.
Question proposed: "That section 16, as amended, stand part of the Bill."

This is what we were talking about a short time ago. The Central Bank will be given power to redeem coins issued under any of these enactments. Section 16(d) would suggest that the Central Bank may, if it sees fit, redeem sterling coins or any other coins. It states:

. . . circulating in the State and issued by one or more of the other participating Member States which are comparable to coins issued under this Act,

"Member States" refers to the 11 participating states in the currency.

I accept that point. However, is the Minister saying that coins could be redeemed if they were from any other participating country?

The way the Bill is worded it appears that the Central Bank may do so if it sees fit. Why not say that the Central Bank "will" do so? The present wording seems discretionary.

The wording is the same as the current Act and it has been transposed into this legislation.

The withdrawal of coins by the Central Bank under the present Act would not be in similar circumstances to a general withdrawal of all coinage. At present, if the Central Bank decides to withdraw the farthing or the halfpenny that is a reasonable decision and it is understandable why the discretion would have been given in the original legislation. However, surely it should be mandatory in terms of a general withdrawal of coinage?

This section relates to the redemption of certain coins. It piggybacks on the previous legislation in which certain coins, such as the farthing, were taken out of circulation. The halfpenny and penny were withdrawn shortly after. The section is necessary because, at some future stage, the European Central Bank may decide to withdraw the cent.

That is fine but when we asked the Minister about this previously he said section 16 would allow the Central Bank to ensure the clearing banks would exchange amounts of more than 50 coins. Now he is saying it is a different provision to allow for the withdrawal of the cent and for the retention by the Central Bank of its powers and functions in respect of the withdrawal of coins of small denominations.

The fairest thing to do would be for me to examine the point raised by Deputies Noonan and Fleming about people bringing basket loads of coins to the bank to be redeemed.

I am specifically talking about people with more than 50 coins, not a basket load.

Is the Deputy's point that the Bill should contain a provision to ensure banks are compelled to redeem coinage?

I will seek to clarify that before tomorrow when we discuss Report Stage and will make any necessary adjustments then.

Section 16 deals with the redemption of coins and states that "all sums required for that purpose", which I assume to mean the cost shall be borne by the general fund of the Central Bank "and debited therein to the currency reserve". We asked earlier who would bear the cost of this and the Minister stated that he would like banks to pay for it. However, does this provision mean that the Central Bank will pay the full cost of redeeming the coins?

Two separate transactions are involved. The cost of redeeming the coins when a person brings them to a bank will be borne by banks. The cost of disposing of them will be borne by the Central Bank.

Nonetheless, banks are likely to say that they are incurring extra costs by having to do this and will probably send a bill to the Central Bank for the costs associated with it. They will try it because they will not bear costs for fun.

The Central Bank has various powers relating to the banks in its remit.

Question put and agreed to.
Sections 17 to 21, inclusive, agreed to.
SECTION 22.

I move amendment No. 10:

In page 11, line 3, to delete "European Interbank Offered Rate" and substitute "Euro Interbank Offered Rate".

The Dublin interbank offered rate, known as the DIBOR, is to be discontinued from 1 January 1999 and a euro area reference - the EURIBOR - is being adopted as a standard for the Dublin market. This has been referred to as the European interbank offered rate. However, I understand publishers of EURIBOR are anxious that the acronym is interpreted in a standard way across the euro area, which will be the Euro interbank offered rate. The Central Bank, the European Monetary Institute and the Irish Banking Federation have consulted on this matter and they agree that the Euro interbank offered rate is the appropriate term.

Amendment agreed to.
Section 22, as amended, agreed to.
SECTION 23.
Question proposed: "That section 23 stand part of the Bill."

Section 23(2)(a)(iii) deals with the prior notice in Iris Oifigiúil. Has the Minister a section note on it?

This requires the Minister to give at least a month's notice in Iris Oifigiúil of his or her intention to effect a redenomination into euro under section 23(2)(a)(i) of any debt issued in a currency to be replaced by the euro.

Is it the expert view that that is sufficient notice? It seems to be short.

It is considered that provision should be made for formal notification of bondholders should the Minister decide to redenominate the debt under reference, hence the requirement for notice in Iris Oifigiúil. It is believed that it will never be used in any event but it is thought to be long enough.

Question put and agreed to.
Sections 24 and 25 agreed to.
SECTION 26.

Amendments Nos. 11, 12 and 13 are related and may be discussed together by agreement. Is that agreed? Agreed.

I move amendment No. 11:

In page 14, subsection (4)(a), line 47, to delete "10" and substitute "5".

These amendments arise under section 26 which I understand would mean companies renominalising their shares into euro. The normal quotations we hear in the evening from the Irish Stock Exchange denominated in pence or pounds would be changed into euro. Is it correct to say that it is the nominal value of the share rather than the quoted price which is in question?

If it did not translate easily into euro equivalents, a company would want to round up or down on the nominal value of the shares. A discretion is given of 10 per cent of the nominal share value of the company and this would be put in a special fund which would be the residual fund as a result of the rounding up or down. My first amendment has been tabled for debating purposes. Ten per cent is a significant discretion to be given so I suggest it be deleted and 5 per cent be substituted.

I will deal with the section first and then the individual amendments.

Section 26 deals with companies which wish to renominalise their capital structure, which means expressing their share capital in convenient amounts of euro, where simple redenomination would lead to inconvenient, uneven amounts. The section provides that companies may do so either during the transitional period from 1 January 1999 to 31 December 2001 or for a period of 18 months thereafter, provided the resolution approving the renominalisation is passed by shareholders. Where renominalisation does not reduce share capital, an ordinary resolution is sufficient. Where it decreases the authorised or issued share capital, a special resolution is required. After that an amount equal to the decrease must be transferred to a fund to be known as the capital conversion reserve fund. The date of a resolution must be sent to the Registrar of Companies within 15 days and penalties are provided for non-compliance

With regard to amendment No. 11, the facility has been designed to allow the company to express its nominal share par value in more convenient amounts. There is no question of existing capital being reduced to repay any part of it to the existing members. In effect, the existing issued share capital is divided between a reduced issued share capital to reflect the amount of reduction made in the nominal share par value and the balance to be transferred to a reserve fund.

It must be noted that the amount in the reserve fund cannot represent more than 10 per cent of the reduced share capital. The effect of this is that the actual amount of the overall reduction that can be effected will not amount to more than 9 per cent. This is explained by a simple example. Let us say the capital was £100. If this is reduced by a straight 10 per cent, the resulting share capital will be £90. However, the amount of reduction, £10, would now represent 11.11 per cent, in other words, ten over 90 of the reduced share capital. In practice, a company will look at the redenominated nominal share par value expressed in euro units and, within the limitations contained in this section, decide to what alternative amount it would like to renominalise.

If the amendment proposing the substitution of 5 per cent for 10 per cent were accepted, it would considerably reduce the flexibility of companies. The actual total capital of the company is not being reduced. It must be remembered that Article 33 of the second EU company law directive provides that where capital is reduced through transfers to a reserve fund, the amount of that reserve fund cannot represent more than 10 per cent of the reduced subscribed capital. Companies should be given the amount of flexibility which a 10 per cent limit will permit.

I do not have the expertise to the tell the Minister what percentage it should be. However, giving somebody 10 per cent discretion means giving them a great deal of movement from a particular point. Has the Minister consulted with the Irish Stock Exchange about this and is it happy that the 10 per cent meets its needs? I presume similar provisions will be enacted in other participating states. Are they opting for 10 per cent as well?

Consultations took place with the Irish Stock Exchange. It is not over excited by this because of what is going on there. The nominal par value could be a totally different matter. There could be 25p shares at present which are traded at £10 or whatever the case may be. It does not really concern the Stock Exchange but it was consulted about it.

What about IBEC and the Small Firms' Association? I am trying to establish the basis for the Minister's decision.

There is no question of the capital being repaid to a new member in this regard. When we join the euro there will be unusual denominations of par vaue, for example, what 25p shares will be denominated as in euros. The purpose of this is to allow companies to renominalise to a rounder sum, let us say 40p or 15p. However, during that accountancy transaction they will not be able to repay part of the existing share capital to the members. The difference will be transferred into the conversion fund which is non-distributable. The total amount of the conversion fund cannot comprise any more than 10 per cent of the capital.

As this section will allow for a decrease in the share capital, will it require an amendment to the companies Acts? That issue has long been sacrosanct. Does the establishment of the new conversion fund exist in company law at present? If not, will amending legislation be introduced to facilitate it?

I do not think it is necessary. Section 26 states:

This section shall apply-

(a) to every company having a share capital, and

(b) notwithstanding anything to the contrary contained in the Companies Acts, 1963 to 1990, or in the memorandum or articles of association of a company to which this section applies.

That covers the Deputy's point.

Will this legislation effectively supersede any contrary provisions in the companies Acts?

We are effectively changing the companies Act.

Yes, but the section provides that a company may do so during the transitional period from 1 January 1999 to 31 December 2001 or for a period of 18 months thereafter.

Perhaps the Minister should inform the Department of Enterprise, Trade and Employment about this. The amendment to the companies Act should be taken on board in that capacity.

This is included at the request of the Minister for Enterprise, Trade and Employment.

It would be wise to tell her. The Minister should remember what will happen the next time somebody does not tell her something.

The Deputy's timely reminder in that regard has been taken on board. Some of the officials accompanying me to this meeting are from the Department of Enterprise, Trade and Employment.

I also asked about the practice in other participating states. Are they using the 10 per cent leeway?

The 10 per cent is laid down in the second EU company law directive.

Amendment, by leave, withdrawn.

I move amendment No. 12:

In page 15, subsection (9)(a), line 19, to delete "£250" and substitute "£1,000".

Section 26(8) provides that when the resolutions described by the Minister are passed by a company, printed copies of the resolution must be forwarded to the Registrar of Companies within 15 days of its passing and the registrar should duly record every such resolution so sent. However, the maximum applicable fine for non-compliance is £250. That appears to be a derisory amount. It does not indicate that one is serious about the requirement to file with the Registrar of Companies. It is not even an absolute fine but a maximum fine which can be imposed by the District Court on summary conviction. However, the district court judge can impose a fine for a smaller amount; it could be as little as £5 or £10.

The amount in the Bill is too small. It is provisions such as this which bring the Oireachtas into disrepute. People will wonder what we are thinking of in providing for a maximum fine of £250 for companies which do not fulfil a requirement to file extremely important information with the Registrar of Companies. I do not know what the appropriate amount should be but I understand offences of a corresponding nature under the companies Acts are liable for fines of up to £1,000.

Section 143 of the Companies Act, 1963, deals with the registration obligations of a company to file copies of certain resolutions and agreements. Under subsection (5) of that section, if a company fails to comply, the company or the officers of the company in default can be liable to a fine not exceeding £250. In the next revision of the Companies Act, perhaps a case can be made for updating all these fines. However, this provision ensures consistency in the various sections.

Section 26 contains the penalty which can be applied where a company or its officers fail to send a printed copy of a resolution to the Registrar of Companies for recording within 15 days of the passing of the resolution. The amount of the fine shall not exceed £250. A fine not exceeding £250 as proposed in the subsection is equivalent to the fine that can be imposed under section 143(5) of the Companies Act, 1963. This section also deals with the submission of printed copies of resolutions to the Companies Registration Office for recording by the registrar.

Section 25(7) also includes a fine of £250. It states that where a company fails to send a printed copy of any resolution under subsection (3) to the Registrar of Companies in accordance with subsection (6), he shall be guilty of an offence and be liable on summary conviction to a fine not exceeding £250. I take the Deputy's general point about Acts passed by the Oireachtas being brought into disrepute. However, a sum of £250 does not bring the Oireachtas into disrepute. Other Acts contain fines of 1p and £1. When the Tánaiste and Minister for Enterprise, Trade and Employment reviews the companies Acts, perhaps all the fines can be standardised. A fine of £250 has been included in this section because it corresponds with section 143(5) of the Companies Act, 1963, which relates to the same point.

The Minister is falling into what the former Tánaiste, the late Brian Lenihan, described as the fatal fallacy of consistency.

They are not the exact words he used, but the Deputy is very close. I am informed the late Brian Lenihan said a foolish consistency is the hobgoblin of little minds. That was quoted at me in the House on one occasion.

Here we go again. The late Brian Lenihan had another phrase which was more pithy.

On a point of clarification, the figure of £250 was not in the 1963 Act. It was revised in 1982 and when the Companies Act, 1990, was revisited, the fine remained at that amount. Section 143(5) of the Companies Act, 1963, was revisited regarding the sums. In the 1963 Act, it was a sum not exceeding £50. This was increased to £250 in 1982 and the sum remained unchanged in the 1990 Act.

It is a derisory amount. The Houses of the Oireachtas do many things at which the public is amazed. However, we spend much time legislating and heavy requirements are placed on companies on pain of penalty, but they are not enforced. The requirement under the Bill is to file certain documents which are considered important within 15 days with the Registrar of Companies. If a company chooses to ignore this requirement, it could be fined up to £250 in the District Court. It is not even a mandatory fine of £250; it is the maximum amount. The fine imposed is totally at the discretion of the district court judge. It is not the way to do business. A headline fine should be set to show this is serious legislation and, although non-compliance will not result in a prison sentence, it is a serious obligation. A maximum fine of £250 on a company is a joke.

It is important to have a sense of proportion about this matter. This relates to the non-filing of a document regarding renominalisation. This is not the same type of offence as other matters under the companies Acts, such as the filing of accounts and returns.

I agree.

It would not be possible to classify it in the same order. There should be consistency with relevant sections of the companies Acts regarding filing. Until the Minister for Enterprise, Trade and Employment reviews the companies Acts, I intend to retain a fine of £250 in the section, notwithstanding the advice of my good friend, the late Brian Lenihan.

The sanction should be reasonably modest. It is not a requirement which should have the penalty of a jail sentence for non-compliance. However, it would be as good to include no penalty as a derisory amount. I included the sum of £1,000 in the amendment for the purpose of debate; if I considered it serious, I would have included the figure of £10,000. In 1963 one could buy a three bedroom semi-detatched house in the county area of Limerick for £2,000. In that context a fine of £50, which was approximately 2.5 per cent of the price of a house at the time, was considered to be an appropriate amount.

It is idle to include a provision for a maximum fine of £250 now. Nobody will bother taking prosecutions which might result in a maximum fine of £250. If the Registrar of Companies does not receive the documents, why would he go to the District Court if that is the maximum sanction? Many similar provisions in legislation passed by the Oireachtas cut the ground from under our feet as serious legislators. I will not call a vote on this matter but I will return to it on Report Stage.

Amendment, by leave, withdrawn.

I move amendment No. 13:

In page 15, subsection (10), line 30, to delete "may" and substitute "shall".

This amendment arises in relation to section 26(10) and refers to the capital conversion reserve fund. The Minister said that when a company renominalises its shares in the euro and there is a residual amount, it will go into the capital conversion reserve fund and that the amount could be up to 10 per cent of the nominal value of the company.

The subsection states that the company may, notwithstanding any other provision of the section, allocate bonus shares to shareholders. The nominal value of a person's shareholding will be reduced when it is transferred into the euro. The money can then be lodged into the capital reserve fund and there can be an issue of bonus shares. It does not state that this is the only thing a company may do with the reserve fund. May a company use the fund for other purposes? If so, and if it can be used as a deposit fund, will it be injurious to the interests of the shareholders whose nominal value of shares will be lower following the conversion? The amendment would make it mandatory for the company to issue bonus shares but as the Bill stands, it would be at the discretion of the company to do so if it wished.

The capital conversion reserve fund will come about because the company wishes to express the nominal share par value in more convenient amounts. In this instance it will be by reducing the nominal share par value within limits. Section 26(10) permits a company to use the amount of the capital conversion reserve fund to reallot the amount of the fund to shareholders by way of fully paid bonus shares.

However, in some companies the number of shareholders and the number of shares they each hold would make it impossible to ensure that the shares could be allocated to each shareholder pro rata with his or her existing holding as it would involve fractions of shares. It may be that in such cases with the passage of time the capital conversion reserve fund, when aggregated with other reserves of the company, could be used to issue bonus shares. In the circumstances it is considered appropriate to allow companies to examine their particular case and decide whether to issue bonus shares rather than require them to do so.

Obviously there will be an advantage to the shareholder to get such bonus shares - he will have more shares and the bonus shares will have a tradable value although denominated differently. I presume that when renominalisation takes place it will not affect the market value.

Market values are determined by the market. Bonus and scrip issues are discounted for in the market place. One cannot say for definite.

A company may find itself in circumstances where it would not be practical for it to issue bonus shares because it would involve fractions of shares and the prudent course may be to wait until other reserves might be combined with a capital reserve fund to be used for the bonus shares. Does the Minister consider it necessary to ensure that the money stays within the capital reserve fund awaiting that eventuality and that it cannot be used for other purposes, which would discriminate against the shareholders?

That point is covered in section 26(4)(b) which reads:

The provisions of the Companies Act, 1963, which relate to the reduction of the share capital of a company shall, except as provided for in this section, apply as if the Capital Conversion Reserve Fund were paid up share capital of the company concerned.

Paragraph (b) ensures that the money transferred into the capital transactions reserve fund will not be capable of being further distributed.

The Deputy's other point is covered in subsection (7) which states:

Any renominalisation under this section shall not in any way change the rights, privileges or advantages that were held by, or obligations, restrictions or limitations imposed on, shareholders prior to the passing of the resolution in relation to dividends, voting at meetings or other matters.

The section gives a company the options of transferring the funds into bonus shares or leaving them in the conversion reserve fund. In all probability most companies will leave it in the special fund.

Under Deputy Noonan's amendment the company would be obliged to pay it out in shares.

Is there is a third option? A company can leave it in the reserve fund or give out bonus shares, but can it not distribute it?

Section 26(4)(b) covers that point.

Amendment, by leave, withdrawn.
Section 26 agreed to.
Sections 27 and 28 agreed to.
Amendment No. 14 not moved.
Section 29 agreed to.
SECTION 30.

I move amendment No. 15:

In page 16, subsection (1), lines 39 and 40, to delete "designs, dimensions, weights and metal or metals and composition" and substitute "technical specifications, dimensions, composition and design, and designs".

This concerns a curiosity of drafting and I do not think there is any greater substance to it. In section 11 the Minister has taken powers to regulate for the design, dimensions, weights and metals or metals and composition of the euro coins. In this section where powers are being taken for commemorative coinage a different form of words is used. My amendment substitutes the form of words used in section 11 for that used in section 30. In a short Bill such as this there should be consistency in drafting. Is there any substance to the different form of words or is it simply an inconsistency in drafting?

Section 30(1) reads:

The Minister may provide coins of a commemorative nature of such denominations, designs, dimensions, weights and metal or metals and composition, as the Minister may determine.

As such it reflects the wording of section 2 of the Decimal Currency Act, 1990, which relates to commemorative ECU coins which were issued to mark the European Council in Dublin in 1990. However, section 11 of the Bill which relates to coins denominated in euros or cents refers to the technical specifications, dimensions, composition and design or designs of such coins.

The reason for the different wording in the two sections is that coins issued under section 11 are intended for circulation as legal tender across the euro area and they must comply with denominations and technical specifications which the Council lays down under Article 105a(2) of the Treaty which states:

The Council may . . . adopt measures to harmonise the denominations and technical specifications of all coins intended for circulation to the extent necessary to permit their smooth circulation within the Community.

Commemorative coins issued under section 30 may not be intended for circulation as legal tender across the euro area and they do not have to comply with the technical specifications since they would be legal tender in Ireland only. Accordingly, the law relating to them would follow previous Irish law on commemorative coins and that is the purpose of section 30. It proposes to adopt the same wording used for other commemorative coin issues.

I accept that and understand that a distinction can be drawn between commemorative coins which circulate domestically and euro coins which will circulate throughout the euro area. Section 32 indicates that commemorative coins will be legal tender domestically. Therefore, there will be two forms of legal tender of different specification in circulation here. It would be better to line up the two forms. The commemorative coins should be governed by the same provisions as the euro coins in section 11. Otherwise, there will be the inconsistency of two forms of legal tender.

I understand the reasons for the provision but it is the wrong decision. The consistency needed is not with what was done heretofore with commemorative coins but between the specifications for the euro coins and the commemorative coins. Thus, if they both circulate simultaneously as legal tender they will have the same technical specifications, dimensions, composition, design or designs.

Commemorative coins are not intended for circulation. I see the Deputy's point and I will consider the matter.

Section 32 gives the coins legal tender.

That is a normal provision to ensure that commemorative coins could be regarded as legal tender. We will consider the point made about consistency for Report Stage.

It is a small point but it is better to be consistent within the Bill than with the primary legislation.

Amendment, by leave, withdrawn.
Section 30 agreed to.
Sections 31 to 34, inclusive, agreed to.

I promised to look at Deputy Noonan's amendment to section 9. I must give notice that an amendment to section 9 will also incur an amendment to section 4.

Title agreed to.
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