Vol. 143 No. 7
Tairgim:—
Go ndeonfar suim fhorlíontach nach mó ná £10 chun íoctha an mhuirir a thiocfas chun bheith iníoctha i rith na bliana dar críoch an 31ú lá de Mhárta, 1954, chun Tuarastal agus Costas Oifig an Aire Airgeadais, lena n-áirítear oifig an Pháighmháistir Ghinearálta.
When speaking on the main Estimate last week I referred to a number of matters to which the Minister had referred in his opening remarks and I asked for some clarification of the Government's policy on these matters. I also referred to a number of other matters with which the Minister did not deal and asked him to deal specifically with them. The first question I would like the Minister to answer when replying is whether the Government are in favour of having a balance on the balance of payments and thereby increasing our external assets or whether they are in favour of having a deficit on our balance of payments and thereby helping to repatriate our external assets. It seems that there is a clear cleavage between the Opposition and the Government on this point.
The Opposition have said that they are in favour of repatriating sterling assets for productive purposes. The Government have also said in someministerial statements that they are in favour of repatriating sterling assets, but proceeded to fail to do that last year by increasing sterling assets by approximately £1,000,000 and are failing again this year by increasing sterling assets by a sum which it is impossible to gauge exactly at present, but which would appear to be around £10,000,000 or £12,000,000. I should like the Government, through the acting-Minister, to state whether it is their policy to repatriate sterling assets and, if it is, if it is the policy to bring that state of affairs about in the only way in which it can be brought about, namely, by planned deficits in the balance of payments.
May I ask the Deputy where he got the figure of £1,000,000 increase in our sterling assets? Our information is that last year the net decrease—not an increase of £1,000,000 —in our external assets was £9,000,000.
I should like to refer the Minister to the table contained in the June edition of the Trade Journal.The Minister will see there the capital items in our balance of payments account and I want to repeat what I said here before—I should like the Minister's view on it, if he does not agree with me—that the mere fact that there was a deficit in the balance of payments last year of £9,000,000 does not mean that there was an increase in our external holdings of £9,000,000. I gave the figures last week of the deficit in the balance of payments over the past six years and I think I will give them again, because the point which is quite clearly to be perceived from the capital items of the balance of payments account is that a deficit of £9,000,000, £30,000,000 or £60,000,000 in our balance of payments does not mean a drop in our external assets by that sum. I made that point and quoted the figures in the Central Bank Report to show that it does not mean any such drop. The Minister has said that there was a decrease of £9,000,000 in our sterling assets last year—
Net external assets.
——but that is not true.
In our net external assets. The Deputy will have to realise that there is a difference between net and the ordinary statement of our external assets.
The Deputy fully realises that last year the external assets of the Central Bank and of the commercial banks increased and that the sterling assets of the Government slightly decreased. The reason these increases took place was that, in spite of the deficit of £9,000,000, it was unnecessary to finance that deficit by drawing on sterling assets because they were financed by the inflow of capital, as the Minister will see from item No. 15 of the capital account in the June edition of the Trade Journal.
The mistake which the Government made and which the Minister made again last week is in equating these deficits in the balance of payments with a drawing down in our external assets. Last week, on the Appropriation Bill, the Minister, who did not use the word "net," referring to the alleged borrowing policy of his predecessor, said at column 974, Volume 143, No. 5, of the Dáil Debates:-
"It is a dead-weight debt to the extent that we are paying in or about £4,500,000 every year to service that £90,000,000 of extra expenditure, while our external assets were decreased in those three years by £100,000,000."
I wish to assert that our external assets did not decrease by £100,000,000 in those three years. Unfortunately, I have not got the figures for the three years in question, but I could very easily have got them. I will take the six-year period from 1947 to 1952. In those six years there were deficits in our balance of payments amounting to £160,000,000. According to the Minister's idea, there should have been a reduction in our external assets by £160,000,000 for those six years. In fact, there was no such thing.
I would again ask the Minister to look at the recent Central Bank Report and he will see there that, in fact, the reduction by private holders and the Government in those six years was only £30.3 million and the balance ofthe deficits was made up not by drawing down external assets but by this inflow of foreign capital, which is a regular feature of our economy every year, amounting to £75.6 million in those six years, and by drawing on the American Loan.
I am perfectly prepared to argue with the Minister which is the correct position to take up, whether we should, when deciding on what policy to follow, regard the true position as our net position, that is to say, taking into account the amount of foreign capital invested in this country or take into account the gross position of our sterling assets. But whichever side of the argument it is intended to take, it is not correct to state that for the three years the Minister referred to there was a drop in our external assets by £100,000,000, and that for the last six years there was a drop in our external assets by £160,000,000. Nobody has been able to estimate the exact amount of sterling assets this country holds, but it is believed in authoritative circles that the figure is not less than £400,000,000 and may easily be £500,000,000. We in this country are, in fact, owed between £400,000,000 and £500,000,000 and I say that we are in a very strong creditor position and that we can afford to repatriate some of those assets for productive purposes at home. I would be glad if the Minister would deal with this point.
I will.
I am glad because I think it is vital to the whole approach to our domestic financial policy. I think that the error of the Government consisted in regarding the deficits in our balance of payments, which occurred every year practically since the war, as being a drawing down of that £400,000,000 or £500,000,000. Because they believed we were drawing down to the extent of £60,000,000 in 1951, £30,000,000 the year before, and about £15,000,000 the year before that—I have not got the figure—we had the statement by the Government and practically every one of its Ministers to the effect that we were nearly bankrupt and that thiscountry had practically lost its creditor status.
That was based on the misconception that the deficits in the balance of payments in those years meant automatically a reduction in our sterling holdings and that in fact the £400,000,000 or the £500,000,000 worth of sterling assets had been reduced by £160,000,000 in the six years and that we had deficits in the balance of payments amounting to that sum. I think that misconception was the cause of the stringent budgetary policy which the Government operated last year and is operating this year. They believed our sterling assets were being reduced on that startling scale and they thought it was necessary to reduce consumption spending and bring in a stringent financial policy which has had all the results that we forecast and from which this country is now suffering.
No doubt the Minister will try to make the distinction made only fairly recently by Government spokesmen of the difference between the net and the gross position of our external assets. It is true that whereas we owe between £400,000,000 and £500,000,000, this country has debts of a capital nature to foreign holders amounting to—I have not got the figures with me—a bit over £200,000,000 and they say that the net result is that we are only a creditor nation to the extent of about £250,000,000.
I do not think that that is the realistic approach to this problem. The proper approach is to consider the nature of the assets which are foreign-owned in this country. One of the principal items which makes up the figure of £200,000,000 is Guinness's brewery. Nobody is going to allege that such fixed assets as Guinness's brewery are going to be sold overnight and that we are going to have to meet a demand that whatever Guinness's brewery realises will have to be met out of our foreign resources. I think it would be found that in Great Britain very large sums in the form of fixed capital are owed by Great Britain to foreign countries-mainly America and other countriesalso. They do not regard these as liabilities to be taken into account when trying to determine whether they are creditor or debtor nations. I want to assert that we are a creditor nation to the extent of between £400,000,000 and £500,000,000 and that we can well afford to repatriate some of that for productive capital purposes at home.
It is an easy thing to put arguments into the mouth of an opponent and then ridicule them. I think that is what the Minister did in opening the debate on the main Estimate last week because we on this side of the House never said that we were against external assets. We never said that we were in favour of keeping some of these external assets against the rainy day when we might have to meet serious deficits in the balance of payments through, perhaps, no fault of our own. But our policy is this. We are in favour of maintaining sterling assets. We believe that we have an ample supply of them at the moment to meet any emergency and we are in favour of repatriating a good quantity of them for productive capital purposes at home. That is our policy and if the Minister is against it, let him say so; but it is incorrect for him to allege that we are against the idea of maintaining foreign assets.
It is quite obvious, as the Minister pointed out, that every country in the world does its best to maintain foreign assets, to keep foreign assets either in its Central Bank or in some fund like the Exchange Equalisation Fund as set up in England and Canada. But, when we argue in favour of increasing the Irish Government owned securities held by the Irish Central Bank, we are not saying that we are against the Central Bank holding any foreign securities at all. On the question of the deficit in our balance of payments and on the question of repatriating sterling assets, I would be glad if the Minister would inform the House what Government policy is on that particular subject.
Another item on which I think it is of importance that the Government should inform the House is the position of the current Budget. The Minister,in opening his Estimate last week, made no reference to the position of the current Budget. I think this is an extremely opportune time for a review of the position on the current Budget. I said last week that there is at the present moment a substantially increased revenue over the estimated revenue. If Government expenditure, after making deductions for the capital items in the Supply Services, is at £101,000,000, and if the revenue continues to run in surplus over the Estimate for this year, as it is doing at present, we are going to have a substantial surplus on the current Budget this year. If there are factors which will militate against that, I would be glad if the Minister would inform the House of them.
I gave the figures last week to the House of the estimated increase in revenue from customs which was made in the Budget of this year, and I have shown that the estimated increase in revenue from that source has already been reached, and that there will be a substantial surplus on the estimate because of the fact that imports are running at a high figure at the present time. I also showed that the revenue from excise has already increased beyond what it was estimated to be, and that there would be a substantial surplus in revenue from excise, in excess of what was estimated in the Budget. It seems to me quite clear that, at the moment, our revenue is going to exceed the figure of £101,000,000 by several million pounds. Now, if that is not correct, I would be glad if the Minister would inform the House what the position is.
At the present moment, expenditure is not running at the same increased proportion as revenue is. If it is anticipated that expenditure is going to be increased more than was expected in the Budget, I would be glad if the Minister would inform the House of that fact. All I am saying is that if expenditure is at the figure of £101,000,000, as was anticipated in the Budget, then there is going to be quite a substantial surplus on the Budget. If that is correct, I can see no reason for not giving tax reliefs atthe present time in the form of a Supplementary Budget.
I know it can be said that it is difficult to forecast the outrun of a Budget, but the Minister and his advisers were able to forecast that there was going to be a substantial deficit, or an alleged deficit, on the Budget of 1951. If they can forecast a deficit, I can see no reason why they cannot forecast a surplus, and if the Government are desirous of giving some relief to the taxpayers, of increasing purchasing power and of improving the state of business in the community, I think it is an appropriate time to do so now, if, in fact, the outcome of the Budget is to be a surplus.
Another item on which I would be glad to have information from the Minister is the attitude of the Government towards borrowing from the commercial banks. We on this side of the House have made our position quite clear. I have no doubt that many people will be anxious to know if the Government are in agreement with our policy. Our policy, as stated by Deputy McGilligan, is that the Government should not give the same rate of interest to the commercial banks which lend to the Government merely by credit creation as it gives to private holders who invest in Government stock. There is a clear distinction between borrowing from the public and borrowing from the banks. We have made it quite clear that we are against giving a high rate of interest to the commercial banks which merely lend to the Government by means of a book entry. This is, of course, a vital matter. I am of opinion that the capital formation, which is going to be required in the coming years, is going to be financed only in part from loans from the public, and that the commercial banks are going to have to take part in the expansion of State capital formation which, I think, must take place in the next few years. The attitude, therefore, of the Government to the commercial banks is of vital importance, and the Government's attitude towards the rate of interest to be paid by the commercial banks is of vital importance also. We have stated our policy, and we would be glad tohave from the Minister a statement of Government policy in this regard.
Another item of policy on which the Government and the Opposition would appear to differ is the investment of the Central Bank's assets in Irish Government securities. We have said that it is our policy to invest a proportion of the Central Bank's assets in Irish Government securities. The Government is against this policy. I am of the opinion that it is time the Central Bank Act was amended. I think the Central Bank Act should be amended in order to give more control to the Minister for Finance to direct the Central Bank if necessary to invest a proportion of its assets in Irish Government securities. I am also of opinion that the Central Bank Act should be amended in order to give it greater power of control over the commercial banks. At the moment it has powers which have never been exercised to discount bills and to purchase and sell securities, so-called "open market operations." By means of the discounting of bills and by means of open market operations Central Banks of other countries have been able to exercise a control over the liquidity ratio of the banks of their countries and therefore control over the credit expansion or otherwise of the commercial banks.
I think our Central Bank should exercise such a control over our commercial banks and the Central Bank Act should be amended so that if the Minister for Finance thought it necessary, the Central Bank could engage in such operations as discounting bills and what are known as "open market operations." I would be glad of the views of the Minister on these matters.
I have said that we are in favour of investing portion of the Central Bank assets in Irish Government securities. The Minister purported to answer that argument in introducing the Estimate for his Department last week by quoting the figures of foreign holdings of other central banks and other exchange equalisation funds. I think such a comparison is almost ludicrous because it is impossible to compare the operation of the Irish CentralBank with the Exchange Equalisation Fund of Great Britain. They are two separate institutions with two separate and distinct functions. If the Irish Central Bank had what a number of other Central Banks have, namely, control of the foreign reserves of the State, then there might be some substance in the Minister's argument. But the Irish Central Bank has no control over the foreign reserves of the State. The foreign reserves of the State are owned by private people, by the banks and by the Government and our Irish Central Bank has only such foreign reserves as are transferred to it from time to time from the commercial banks who desire to obtain an expansion in the note circulation in this country.
We could pass laws here as other countries have done appropriating to the Government via the Central Bank of our country all the foreign reserves of our State, but we have not done that. Other countries have—Canada, Australia, France and England—but we have not. At the moment the only foreign reserves that our Irish Central Bank holds are the securities that are transferred to it by the Irish commercial banks for the purpose of expanding the note issue.
In this regard I would like to quote the Minister a very short passage from a fairly recent book by Norman Crump, entitled The ABC of the Foreign Exchanges.At page 153 of this book the writer, referring to the crisis of 1932 in England, says as follows:-
"In early June, 1932, as much as £68,000,000 of the fiduciary note issue was backed by ‘other securities,rsquo; which in point of fact consist largely of foreign exchange."
Then he goes on to make this point:
"Francs, dollars and other foreign currencies are hardly a suitable backing for the British note issue."
That is exactly the position we have in this country. The backing for our note issue is not gold—or only a very small proportion of gold—or Irish Government securities as it is in Britain where they have British Government securities, but foreign securities—British Government securities. And in a very nice understatement the writer of this book refers to the fact that francs, dollars and other forms of security are hardly suitable backing.
What did he say was suitable backing?
Well, the Minister I presume knows what the backing of the British note issue is now.
Yes, but what would Mr. Crump say it should have been at that time?
I am not going to read the book to the House. The Minister can get the book. The Minister knows right well that the British note issue is not backed by dollars, is not backed by French francs, is not any longer backed by gold, and if he will look at the accounts of the issue department of the Bank of England he will find that against liabilities of these notes which the Bank of England have issued, is not a cent of a dollar, a centime of a French franc and no gold at all but British securities.
We have, for better or for worse, a system here by which our note issue is controlled by the transfer of British sterling. It is unnecessary to amend the Act which establishes that our note issue should be backed by British sterling for the purposes of the policy of which we are in favour. All we are saying is this: that when the Central Bank gets British sterling and British securities and issues as a liability, in consequence of the transfer of sterling to it, the Irish legal tender, the assets which it has as a result of that operation should not be invested in England at 1? per cent. but that a portion of them should be invested in Irish Government securities.
As I said it is almost ludicrous to compare the Exchange Equalisation Fund which has no function whatever in issuing notes, with the Irish Central Bank. If the Minister had compared the Irish Central Bank with the issue department of the Bank of England it would be a much more proper comparison and if he did, I would say thatagainst the note issue the British do not hold one scrap of foreign security but hold instead British Government security, and against our note issue we do not hold one scrap of Irish Government security but hold instead British sterling.
I suggest that that situation should be changed and that a proportion of the assets of the Central Bank should be invested in Irish Government securities. The figures are available to show the amount or the number of notes which the Central Bank have to redeem every year. It is round about an annual average of £750,000. To meet an annual redemption of £750,000 the Central Bank holds over £60,000,000, and I think that that takes prudence to the point of farce. These are some of the matters upon which the Government and the Opposition differ, apparently very radically, in their approach to our financial problems.
Last week some Deputies referred to the fact that we were talking too much about financial problems and that we should get down to the question of increasing both our agricultural and our industrial production. I am all in favour of increasing agricultural and industrial production and in providing full employment. Deputies who make that appeal must bear in mind the fact that nowadays because of the tremendous control that the Government has, both directly and indirectly, over the economy of the State, these financial matters are of paramount, if not vital, importance in relation to industrial and agricultural production and in relation to the level of employment. There is no use in saying we are in favour of expanding our economy if simultaneously we bring in a Budget which has for its aim the contraction of that economy. There is no good in saying that we are in favour of expanding our economy if our Budget is designed towards reducing consumption. We have to face the fact that the Government and, in particular, the Minister for Finance, wield a very mighty weapon when they introduce the Budget every year; that that weapon can be used either to smash our economy, as it very nearly did last year and this year, or that it can beused to build up that economy as was done in all the Budgets introduced by the inter-Party Government.
For many months now we have been trying to get from the Government a clear statement of policy. We drew issue with the Government last year because of the policy adumbrated in the 1952 Budget. That budgetary policy was designed towards reducing consumption, towards reducing spending with a view to getting, and towards reducing imports in order to bring about a balance in our balance of payments position. We said last year that we were against that policy. We did not believe it was necessary to reduce consumption last year. We did not believe it was necessary to increase taxation or to cut food subsidies in order to ensure that the people would spend less. We said that the balance of payments position was one that would right itself; that exports would expand and that the large volume of imports, due largely to the rising price of imports, which had ceased at that time, and due to stockpiling, which had also ceased at that time, would decrease, and that all these things would bring about an automatic reduction in our balance of payments; and, from that viewpoint, it was unnecessary to look with alarm on the position and equally unnecessary to bring in the drastic measures that were introduced last year.
I do not know whether it is still Government policy to reduce consumption and spending, and I would be glad if the Minister would say, in reply, whether or not it is still Government policy. If it is, then there is another point upon which we join issue with the Government. The seven salient points resulting from the policy of stringent budgetary finance and deflation, introduced last year, were enumerated by me last week. Very briefly, they were: the increase of 40 per cent. in the cost of living; the reduction in industrial production, which only recently has reached the figure it had reached in 1951; the flight of capital from this country which amounted last year to £2.3 million; the increase in emigration; the decline in consumption by 6 per cent.; and the startling decline in employment.
These are the things which have resulted and necessarily followed from the policy of deflation and the policy of reducing consumption. If that is still the Government's policy, then let them tell us that is so. If they are in favour of an expansion of purchasing power, as we were in favour of it last year and this year and in every year in which the inter-Party Government was in office, let them say clearly they are in favour of such an expansion and let them frame the appropriate budgetary policy which will result in such expansion.
There is no use in the Minister, or any Deputy who supports his Government, saying that he is in favour of full employment and of increased agricultural and industrial production—after all, we are all in favour of these things —when the Government's financial policies are directed towards achieving the opposite results.
In conclusion, we have had experience of a stringent financial policy for the past two years. Most of us told the Minister and his colleagues what the results of that policy would be. We said we were against it. We said it was unnecessary. To-day we are once again in the position where the unemployment rate is rising up above what it was last year and the year before, when the cost of living is higher almost to breaking point in relation to the people who have to bear it, when there is every sign that there is no expansion in capital formation and when there is no sign of any expansion in consumption. If we want to change these things, if we want to have an expanding economy, we must implement financial policies diametrically opposed to those which have been in operation for the last two years. I, for one, would be very glad to see the Minister accepting our policy, taking it over completely, if necessary, and bringing about the increased industrial and agricultural expansion and the reduction in unemployment which this country experienced during the three and a half years of inter-Party Government.
Notice taken that 20 Deputies were not present; House counted, and 20 Deputies being present,
I put a question to the Minister for to-day's Order Paper and I consider that the Minister has been very neglectful of one of his foremost duties in sidestepping that question.
I did not sidestep it.
The Minister, as one who has what the Fianna Fáil Party are very fond of talking about, collective responsibility, passed a question, which deals explicitly and in a most purposeful way with the affairs and the interests of his Department, to the Central Statistics Office. I am quite appreciative of the work that is done in the Central Statistics Office. I had a very large part in seeing that such an office was set up and was removed from the control of the Department of Finance or of Industry and Commerce so that the various facts bearing on the economy, social position and financial strength of the country might be removed from under the thumb of any departmental Minister. For that reason only is the Taoiseach answerable in this House to parliamentary questions relating to that office. The question that was put down to the Minister as Minister for Finance, and which was transferred on the new basis that the Minister has no function in assembling these matters, bears in a very important way on vital interests of this country.
I did not put down the question for my own personal information. I could forge through the very elaborate series of documents which I am recommended by the Taoiseach's answer to-day to look through for this information. If I gathered this information, it would inform myself, but it would not be there for the examination of the various members of the House of every Party. I submit that it is the Minister's concern that the information and the implications that would be contained in such a table should be generally known. Again, if I personally assembled this information for myself and circulated it to members of the Dáil it would be suggested that I was doing so with a particular slant and a particular interpretation of my own on the figures.
The Minister is perfectly well aware that these figures are assembled in that particular form and under his own hands in order to guide him in a clear review of the various aspects of certain things that bear on the financial strength and financial equilibrium of this country and on production costs and wages. I do not think that the Taoiseach is doing his duty when he gives me the answer that he gave to-day and when, in respect of a particular and standard formula through which the Minister for Finance and his Department look at the economic and financial position, he tells me that I can find all the statistics in the Quarterly Statistical Bulletinof the Central Bank, the annual reports of the Central Bank, the finance accounts of the State, theIrish Statistical Survey,1951 to 1952, theIrish Trade Journal and Statistical Bulletin.I think that is an insolent way of dealing with the House and an irresponsible way of dealing with vital matters.
In his opening statement on Tuesday last, the Minister travelled the world from Canada to Australia, from Timbuctoo to God knows where to find out whether the Central Banks and the Governments in these countries were daft or not. He gave us an assurance that they were not, on the basis of figures showing that they have external assets. He implied that he had explained to us what the function of these external assets was in various countries through which he travelled in imagination or with his statistical eye. He did not think that it was unnecessary to give the Dáil all this valuable information. He did not think it was unnecessary or laborious to get his Department to translate the various types of money that were current in those countries and the various types of money in which they held their external assets into dollars. We are given that kind of dope to bemuse and befuddle Deputies in discussion and we are refused the formal setting out of matters that would show the trend over the last few years of monetary circulation, bank deposits, bank debits, bank advances, net sterling assets of associated banks, Exchequer issues, imports, exports andre-exports, gross agricultural output, agricultural output consumed at home, agricultural output exported, agricultural price index, transportable goods production, cost of living, industrial wage rates, agricultural wage rates.
I want the Minister to say why it is that he regards it as necessary to assemble these things in his Department in order to steady the steps and to safeguard the outlook of the Department of Finance and his own outlook and the outlook of the Government and why, particularly in the difficult and extraordinary position in which we are to-day, he would deny the House and the public these assembled facts and the implications thereof.
Why was the Central Statistics Office set up? It was to get the facts under various headings. What good are the facts unless they are taken systematically and related to one another, and unless we are able, with the best possible advice and guidance that we can get, to understand their implication and to see the trends? For what purpose did we develop the Central Statistics Office? It was not for the purpose of getting isolated statistics. The Minister, more than anybody else, will realise how necessary it is, when statistics are assembled and correlated, and the implications of one brought to bear on the implications of another, that the scheduling and interpretation of the statistics shall, as far as possible, be removed from mere argument. I want to ask the Minister to bring his mind back to that question, and I want to ask him why it is that these facts have not been given in the form in which I asked for them.
We are voting the Minister's Estimate, and the way in which he has carried out his business as Minister for Finance during the year, and it leads us to another matter that it is of vital importance that we would understand the facts. We are told that the Minister for Industry and Commerce, under the machinery for fair trade, is now going to examine on oath the persons connected with the selling of cutlery, spoons and forks, electric light bulbs, nails, screws, petrol, pottery (includingchina and delf), ropes, cordage, binder twine and tyres. Restrictive practices and fair trading in these matters are to be examined by the Minister for Industry and Commerce, under oath.
I submit to the Minister for Finance that there is something that much more vitally affects our people than cutlery, spoons, ropes and cordage, important and all as these are in their lives and their well-being, and which more vitally affects the stability of our people and the better use of our resources and the interests of our people than any of those, and that is money; and in this matter, except the Minister for Finance is better able to face his responsibilities here in explaining to us the machinery under which money is being obtained and the price at which it is obtained and the effect of both the machinery and the price on our people's lives here, we will have to press that before cutlery or spoons or light bulbs or screws or nails or petrol are examined before the Fair Trading Commission money will be examined there, and that we shall be given it on oath if necessary as if we are giving our oaths with regard to cutlery we should do the same with regard to the production, the distribution and the price of money.
When I speak of the Minister I want to be allowed to speak of the Minister for Finance as such without referring to whether the Minister for Finance is Deputy Aiken or Deputy Derrig or Deputy MacEntee but as the Minister of the Government who is answerable here in the House to the people as Minister for Finance for safeguarding their credit and seeing that whatever financial instrument we have in this country is used for the best possible development of the resources of this country and the best possible distribution of the national income among the people as a whole in their own country and without sending them outside.
The Minister had the face to ask Deputy Costello a question there when Deputy Costello was speaking as to what Norman Crump said was the basis or the backing on which British money rested. I wonder if the basis on which British money rests to-day,not being gold and not being external assets, is not the resources of Great Britain and of her people?
Nothing else, nor in any other country.
I ask the Minister has he any other answer to give to the question he posed Deputy Costello except that. I ask him what backing have we in this country to our money except the resources, except the capacity in quality and in numbers, of our people, and where are we at the present time in relation to that. We are in the position that instead of our credit being based upon our people and their resources and on proper instruments to develop and safeguard these our credit is based, in the same way as the credit of the Englishman or the Welshman or the Scotsman, perforce by the policies that are pursued here, on the strength of the people of Great Britain and the resources of Great Britain, because the only thing that our credit is based on here is upon the British pound note; and I would ask the Minister for Finance if he can give his version of what it is that the British printed pound note is based on.
Certain things have been happening recently which have suggested that the Fianna Fáil Government have now a financial policy, and there are some who would claim that they borrowed it from the inter-Party Government. I wish they had a policy in relation to finance that was borrowed from the inter-Party Government, but I see no sign of there being a financial policy in any way related to our outlook on finance and financial matters. Once upon a time—and there were rough elements in that particular time—they had a policy. They would "establish a State bank with control of note issue, provide capital for national and industrial development at a normal rate by imposing, after due notice, a tax on the export of capital, such tax to be imposed on an ascertained percentage of the present export and to be maintained annually on a guaranteed scale until the necessary capital is made available". That is part of the once upon a time policy, so, a State bank;and as regards bank debts, "the State bank shall have power to take over debts contracted to the banks from 1916 onwards on a present valuation of those debts and to pay for such debts in new creations of State credit to be repaid by the debtors at the lowest possible rate of interest by a number of annual payments, the present securities to stand." They were to have credit societies; "Government guarantees of facilities for district credit societies with a view to providing credit for agricultural and industrial development." And they were to have employment schemes to "ensure that schemes of national development in agriculture, road building, road maintenance, fuel-winning, etc., would be at all times in operation or in readiness under State control on which immediate employment could be given at an adequate wage to all suitable able-bodied workers". There was once upon a time a financial policy. Now there is supposed to be a change. We have a change from that, but I see no change in the Minister's policy to-day or the policy that as Minister for Finance Mr. Seán T. O'Kelly, now the Uachtaran, had in March, 1945, before he left us here. If there is any change I would like the Minister for Finance to tell us so.
We have repeatedly complained here that the banking system in this country—the bankers, if you put it like that —have taken the interests of this country and they have denied our people credit of any particular kind for the development of their resources here or the provision of their amenities. They denied facilities to the Dublin Corporation for housing. Every attempt there was for the development of the country here, the suggestion that we had any kind of a machinery here for capitalising the credit of our people and using that credit in the interests of the people in the way in which any normal country does, was absolutely denied us; so that the history of the times given by Deputy McGilligan in his review of past financial history on Tuesday and Wednesday last week sounds all too true; and he brought out in a glaring way the way in which the credit resources of this country havebeen neglected by reason of the fact that we had no financial instrument here in the hands of the people, in the same way as the banking system is a financial instrument in the hands of the English people, to be used in whatever use they want it for, whether in peace or in war. Instead of that, we saw last year the Government using their financial instrument at the dictates of the British Government to pursue a financial policy that suited British desires and requirements, that is, to drive people out of normal employment and to drive them into their heavy export industries and into their armament industries. Therefore, we could very well say that our credit here is backed only by the resources of Britain and the people of Britain through the kind of yes-men operations of our bankers and banking system. But it is backed by the people of Ireland that have been driven out of this country and by the financial resources that have been pushed out of Ireland further to develop those of Great Britain.
That is not the intention of any set of people in this country and we would expect, at this late hour of the day, the Minister for Finance and his colleagues to face up to the question and to delineate, as clearly as he delineated the balances that are held by foreign Governments in the Central Bank, what banks or what banking system we have and the machinery there is for providing credit; also why we pay an infinitely higher price for credit to build our Irish homes and to till our fields than the British had to pay when they were blowing the resources of their country into smoke and flame during the last war and the Great War.
On the 14th March, 1945, when the Central Fund Bill was before the House, we asked at column 1347, Volume 96, of the Official Debates, in order to direct or control the Government in relation to the rate of interest they were prepared to pay on borrowing, there should be inserted in the Bill the following words:—
"in the case of sums borrowed from the Bank of Ireland or any other bank, a rate of interest not greater than £2 per cent. and in the case of sums borrowed from a personother than a bank, a rate of interest not greater than £3 per cent."
At column 1348 of the same volume we pointed out:—
"The report of the recent inquiry into the housing of the working classes of the City of Dublin at paragraph 494, at page 168, says:—
‘Negotiations took place with the Banks Standing Committee on the matter of raising £2,000,000, by issue of stock, but in January, 1939, it was intimated to the corporation that the banks could not underwrite a public issue. The reasons given were:—
(1) the uneconomic character of the housing programme, aggravated by the high level of building costs; and
(2) the magnitude of the sums required for the corporation's five-year programme of public works.' "
"Paragraph 5 says:—
‘Negotiations still continue and in April, 1939, an issue of £1,500,000 of 4 per cent stock at 96, was put on the market of which approximately £850,000 (including Government investments) was taken up. The underwriters had to take up the remaining £650,000. This was taken as a definite indication that the market would not be disposed to respond to any further larger demands in connection with the corporation's housing activities.'"
At that particular time, as regards the relations of the banks and the Dublin Corporation, I said that by taking up the attitude that the building of houses for Dublin workers was not worth spending money on and that the Dublin Corporation was not worth lending money to, the bankers in this country sabotaged the credit of our capital city. They did that, and they were not above taking £650,000 on a loan at 4 per cent. at 96 from a city that was not creditworthy. When we think of what it would have meant by way of saving to the citizens of Dublin if the money had been provided then and if the work had gone ahead at that time and earlier, we have some idea of the obscurantism, the obstinacy and blindness of the bankersand our Government. We have the statement made by the then Minister for Finance indicating the outlook of the Government on the function of the banks at column 1359, Volume 96 of the Official Debates of the 14th March, 1945:—
"The bank's money is, as to the greatest content, made up of the savings of the community as a whole and the banks are responsible primarily to those who lend them that money, who have their savings and deposits in the banks for the safe keeping and management of these funds. As Deputy Mulcahy properly says, the banks also have their responsibilities. They have their obligations to the community just as, as he said, the bricklayer, the engine driver, the farmer and everybody else has responsibilities. But I do not see that the banks are obliged to run themselves into bankruptcy, even to build houses for the Dublin citizens, very necessary as that work is."
Later on, at column 1361, he says:—
"Another aspect of the difficulties of the Dublin Corporation, in particular at that time of which Deputy Mulcahy speaks and at other times, was that bankers are commercial men and must make a financial success of their institutions in the interests of their shareholders."
It was my opinion then and it is now that people who have capital, who have savings, are entitled to expect a reasonable return on their savings when they invest. If they do not care to invest them in any particular class of activity for the reason either that they think their savings would not be secure there or would not give them sufficient return, they are entitled to withhold their savings.
In the same way, if there are people who are unemployed, if there is a developing population here that want to have their employment around them, progressing in an expanding way, if there are people rearing families and expecting to see their children finding employment in this country, we areconcerned with the people of the country living in this country being able to use their own qualities and their capacities in getting a living from the resources of the country. We are concerned also with people who have accumulated savings being able to get a return on their savings and if we reach circumstances in which persons are not desirous of lending their savings for the building of houses or the carrying on of any class of work that the State considers it is desirable would be carried on, then the Government have their duty in the matter to express the credit of our people and the capacity of our people in moneys made available and created for the purpose of developing the country.
Who would say to-day that the people of Dublin and the people of this country merited in any way the disparagement of their credit or their strength that the Banks' Standing Committee in 1939 poured on the people of the City of Dublin, and who, looking forward into the future, is going to say that the resources and the capacity of our people here are not resources on which we can build our credit? The Minister's attitude to-day is no more a financial policy than was the attitude of the Minister for Finance, Mr. Seán T. Ó Ceallaigh, in March, 1945, when he declared that the bankers were commercial gentlemen who had the responsibility to look after their shareholders and who had no responsibility for going into bankruptcy. We are asking the Minister to direct his attention to the financial instrument that we have here in this country, to gather together and to utilise through the Government or through any other capital-using machinery in the country, the resources of this country in order that its people may expand and that its people may live.
In the last loan the Minister has asked the banks to take up £5,000,000, and he has told the banks that he will give them 5 per cent. per annum on that £5,000,000 for the period of the loan and that at the tail-end of it they will have a bonus coming to them of £150,000. If he is not going to send this question of money to the Fair TradeCommission to have the various aspects of its production, its distribution and its price examined, I want the Minister to answer some questions here as to why he should pay 5 per cent. and give a bonus of £150,000 at the end, to the banks of this country for creating £5,000,000 worth of new money and lending it to the Government. I want the Minister to say if he agrees that this is absolutely new money and that there is not a single halfpenny of it that is the savings of anybody in this country—that there is not a single halfpenny of it that is any part of the paid-up capital of the banks. That is one simple question that the Minister might answer, and I think it is due to us that he would answer it.
I want to put to him a positive statement on the one hand and I want to put an interrogation to him at the end —that on the creation of £5,000,000 or whatever fraction of it it is—there will be 3 per cent. taken off, but I will take the £5,000,000 now—no cost arises to the banks out of creating that money. It is new money. They will not have to increase their staffs in order to deal with it or to deal with any aspect of the additional work created in the country. Assuming that £5,000,000 is spent on housing—to take a standard type of production here that brings certain consequences in its train—I suggest to the Minister that the expenditure of £5,000,000 here on housing will involve the importation of goods to the extent of one-third of that amount, that is, about £1,666,000. If and when those imports are brought in to help to do the work this loan is intended to do, then this country has to disinvest and to pay away to people who have provided those goods from abroad £1,666,000. That is going to involve our banking system in divesting itself of sterling assets—I put them in terms of sterling for the moment, in the same way as the Minister put his other items in terms of dollars. By doing so, they lose an income at about 3 per cent., that is, they divest themselves of investment that normally would bring them in an income at the rate of 3 per cent.
There will be left then in the country, when we have paid for all the imports,about £3,333,000 of new money in active circulation. The practice is that one-seventh of that money will be in circulation in the form of notes and coin. In respect of the additional notes and coin in circulation in the country, the banking system will have to divest itself to the Central Bank of investments to cover that amount and, therefore, they will lose in respect of that amount investments that normally bring them in about 3 per cent. Between what they will have to disinvest by way of imports and by way of additional notes and cash circulating in the country, the banks will lose on the investments they will have parted with about £64,000. I submit that that is their only loss—their only loss in respect of a transaction in respect of which the Minister promises them £250,000 per year and £150,000 when they are leaving.
Others will say that you have to take into consideration the rest of the money that is left in the country by way of current account on the one hand and by deposit account on the other. The usual division of money that is held in the banks like that is one-fifth on current account and four-fifths on deposit. So that, in fact, of the £3,333,000 left in the country after the imports are paid for, £476,000 would be by way of notes and coin and £571,000 on current account in the banks in respect of which no moneys would be paid. There would be £2,285,000 on deposit, on which the banks would have to pay at the present rate of 1½ per cent. Some suggest that the banks lose £34,000 in respect of the increased money left with them on deposit, in respect of which they have to pay 1½ per cent. I want to ask the Minister whether he accepts that or not and whether— if, as a result of this £5,000,000 loan from the banks, an extra £2,285,000 is going to be left on deposit—the banks are going to earn nothing as a result of the handling of these new deposits. Could we have from the Minister an answer to the question: Is any halfpenny of this £5,000,000—or the fraction of it which 97 per cent. represents—that he is going to get from the banks, new money or paid-up capitalfrom the banks? Are the banks going to lose more than £64,000 by reason of disinvestment of their investments to meet the cost of the imports as a result of the expenditure of £5,000,000 on such a thing as housing? Does the Minister think that the banks are going to lose any money, net, as a result of the increased moneys that will be left with them on deposit as a result of the increase in the circulation of money in the country?
The Minister promises to pay the banks £250,000 a year from this until, I think, 1977, and to give them into their hands, at the tail-end, the £150,000 in respect of something that is going to cost them a loss in respect of imports of about £64,000, and I do not believe any other loss. If the Minister is not prepared to face up to that, then I suggest to the House that there is a very vital question to be examined here by some kind of a body. If we can have a Fair Trade Commission to inquire into the business activities of people who, by the investment of their own capital and by the labour of their brains and hands, are turning out Irish china, Irish ropes, Irish electric bulbs and Irish cutlery, I suggest that there is a very striking case for an examination into the provision, cost and distribution of this money.
We have the further statement by, I think, some member of the Government that the Dublin Corporation will now get a short-term loan of £2,500,000 at 4½ per cent. I wonder if the Government think we are just daft and that, whereas other countries are not daft at all, we will just take anything that is served up to us here? We are told they have no function in the matter or that they have no information, or that we can get the information which we seek somewhere else if we go and look for it. Does the Minister seriously propose to tell this House, either to-day or to-morrow, that in order to build houses for Irish workers in the City of Dublin credit will be created and paid for at the rate of 4½ per cent.? We have just emerged from a period in which we saw the British fight a war—with all its wastefulness, destruction, doubt and uncertainty—at less than 1 per cent. The last war is called the "3 per cent. war" but it is only called the "3 per cent. war" in relation to the general level of rates at the time. The British Government fought that war on something that was not very far from 1 per cent. It is true that at that time we thought that Irish credit was so poor that the credit that was created in order to meet the provision of turf for our fuel needs had to be paid for at 4 per cent.
I address myself at the moment entirely to the question of why the Government should pay the enormous price it proposes to pay the banks for created credit. I entirely agree that the price which people engaged in agriculture, in industry and in the development of this country through private enterprise have to pay for their money is, perhaps, of even greater importance than the price that the Government pays for the money it expends on capital projects. The price that the Government pays for money has a vital impact on the price other people are asked to pay for their money. Take, for instance, the question of how the Government's borrowing affects the ordinary family. The rate paid by persons in Dublin on money which they borrow under the Small Dwellings (Acquisition) Acts has, as a result of the Government's action last year, been raised from 3¾ per cent. to 5½ per cent. That means that, for every £100 a person borrows from the Dublin Corporation to pay for his house, he must now pay £1 6s. 5d. more than he would have had to pay before the increase in interest rates. I understand that the highest housing loan which the Dublin Corporation will give is £1,800. That amount does not by any means represent the entire cost of the house. Let us, however, take it as an average. As a result of the Government's action last year, the increased rate of interest in respect of a house on which there is a loan of £1,800 to be amortised over 35 years, means an annual increase of £23 15s. 6d. in the repayments. That represents an increase of £2 per month. It would seem to me that the Government stood in, in co-operation with the standing committee of thebanks, to do in 1952 what the standing committee of the banks was doing in 1939, without any interference from the Government—preventing ordinary people from building their homes and preventing the Dublin Corporation from doing the same thing.
Let us consider the present position of the Dublin Corporation so far as building houses is concerned. It now costs the Dublin Corporation about £1,600 to build a three-roomed house and it costs them about £1,700 to build a four-roomed house. I submit that there is an increase there of nearly 10/- per week in the economic rent— and that increase has to be borne either by the tenant, on the one hand, or by the local authority, on the other hand.
Ministers speak in various tongues from one end of the country to the other about their plans for developing and improving the economic condition of the country. We want to know what financial instrument the Government have to put into the hands of our people that would enable them not only to control our finances but to use the creditworthiness enshrined in the skill and capacity with which God has endowed them in the natural resources which he has placed at their disposal. These are questions that the Minister must answer here. No person sitting in the Minister's place should be able, with any spark of responsibility of understanding of the institution to which he is responsible, to evade giving answers to these questions. The position is that there is no financial policy. The various mouthings in which members of the Government have recently indulged, read in the light of the interest payments that they propose to make and that they tolerate, if they do not insist on Dublin Corporation making use of the credit that is being created for them, give the lie complete and direct to any statement or pleading they may have to make that they have a financial policy and demolish completely the protestations and the pretensions upon which they are standing to-day.
The subject of money and credit has been presented in thisHouse and indeed throughout the country, as a mystery beyond the wit of anybody except financial experts to understand. There has always been a deliberate attempt by financiers and others to keep people in ignorance as to the real causes of our social and economic problems and to deceive the community by the use of a technical jargon which is mystifying to everybody but themselves. We have all these slogans taken up by people who, in my opinion at any rate, never gave a thought to the question of money and credit. Deputy Cogan here during the past week talked about my theory of finance and told us that it was not high finance that was going to save this country. I do not know what is Deputy Cogan's definition of "high finance," but I am inclined to agree with the Taoiseach when he said that high finance, in the long run, is reasonable common sense and nothing more. I would like if not alone Deputy Cogan but every other Deputy in this House and people outside could think likewise.
I have been listening to Deputy Mulcahy for the past ten or 20 minutes asking very pertinent questions. I have asked somewhat similar questions before, but I would expect from Deputy Mulcahy, when he asked these questions, some indication as to what he really believes should be done. I think the answer to Deputy Mulcahy's question is, as I have said in this House before, that the Minister is not in control, as he should be, of the credit and the money of this country.
The British Government is in control of the credit and the money of Great Britain.
She is in control of our money and credit here. Let us not try to deceive ourselves in regard to that fact.
That is what we want the Minister to face up to.
The Minister, during the past week in the Seanad, said that the service of the national debt cost £12,000,000 annually. What a lovely title —"service of the national debt"! Would it not be better to call it by its proper name—the interest which hasto be paid on the national debt which, I say, is usury, to be pulled out of the pockets of the people. In reply to questions that we ask in this House as to the interest that has to be paid on money borrowed for public services, we are told about the cost of "accommodation" in the banks—another term to mystify the people and to keep them away from realities. The fact is that we have to pay £12,000,000 in interest for our national debt.
Let me put this point to the House. We have 51,286 agricultural workers in this country each of whom is in receipt of a wage of £4 10s. per week. They are the people who are producing the food of the nation at a cost of approximately £12,000,000. That means in reality that the fruits of the labour of 51,286 agricultural workers must be earmarked to pay this usurious rate of interest on our national debt which has been borrowed from the banks and the moneylenders. In addition to that during the present year the municipal authorities have to pay £2,790,000 in interest on money borrowed to build houses for our people and to do other necessary social work. Our harbour authorities, engaged in another very important aspect of national development, have got to pay £97,739 on money borrowed. The E.S.B., for money borrowed to enable them to carry out electrical development all over the country, pay £1,428,000 in interest alone. In addition, for bank overdrafts for Grain Importers Limited, for Tea Importers Limited, for the former Butter Marketing Committee and for the development of our telephone system, we paid out a sum of £548,154 in interest, making a grand total for these few items of £15,983,711 this year.
Is it not obvious to anybody who thinks at all seriously about the situation that we are just children in this House, that the people outside this House who control our money and credit are the people really in power, who dictate to us what standard ofliving we are going to have and how we are going to conduct the affairs of this country? I agree with Deputy Mulcahy or with anybody else that the time has arrived when we in this House should sit down and decide calmly and responsibly that after a certain given date the British £ will be treated in this country in the same way as the money of any other country. Until that is done we can keep "gassing" here for the next 20 or 30 years and nothing effective will be done for the people of the country.
As I have said some people seem to think that nobody can understand the money and credit system except financial experts. What have we got from our financial experts? For some time, I have been trying to get some information as to where the money in the Hospitals Trust Fund was invested over the years. On the first occasion I asked that question when the present Government was previously in power, I was told that it was in the hands of the commission, that it was not the function of the Government to give the information. that it was a matter for the commission and that the representatives of the people in this House could not be told where it was invested.
When the change of Government took place and the inter-Party Government came in I again looked for the information. What did I find? I found that the millions which we had for investment were invested in London County Council stocks at 2½, 2¾ and 3 per cent., London Electric Transport stock at 2½ per cent., Newfoundland stock and Nigeria stock, Trinidad stock, New Zealand stock, Ceylon stock, Southern Rhodesia stock, Scottish Agriculture stock, at 3 per cent., Australian stock at 3 and 3¼ per cent. and that nine English municipalities got our money at 3 per cent.
What happens as far as our Irish investments are concerned? The Cork Corporation asked for a loan to build a number of houses and we had to pay 5 per cent. for that money from the Hospitals Trust Fund. What is the result of the advice of our financial experts? I took the trouble of lookingup the hospitals' commission's report with regard to the investment of the Hospitals Trust money. What did I find? That in 1939 we lost £52,150 on the sale of investments; in 1940 we lost £120,061; in 1941 we lost £4,998; in 1943 we lost £63; in 1944 we lost £15,242, and in 1945 we lost £10,330.
I put down a question last week asking the Minister to let me know what was the loss on the sale of investments by Hospitals Trust Board in each of the years 1948 to 1953 and the reply I got was that there was a net profit on the sale of investments in 1948, 1950 and 1951 and that the net loss on the sale of investments held by the Hospitals Trust Board in each of the years 1949, 1952 and 1953 was as follows: 1949, £436,366 8s.; 1952, £383,779 2s. 9d.; 1953, £31,895 2s. 11d., and the balance in the Hospitals Trust Fund remaining to the credit of the board at the 31st October, 1953, was £337,913 15s. That meant that because of the advice of our financial experts we invested Hospitals Trust money all over the world while we had to pay 5 per cent. for it here in our own country and we lost £999,634 over nine years, equal to £111,070 loss for each year of the nine years. These are the people that the Government of this country rely on to tell them where our money should be invested.
Now I come to the question of the investment of the funds of the Post Office Savings Bank, the earnings mainly of the working-class people whose half-crowns and five-shilling pieces are deposited there week after week. What do we find? I should like the Minister to explain when replying what all this depreciation means. I looked up the reports recently and I found that in 1947 the amount set aside against depreciation in the value of securities was £24,013; in 1948, £51,691; in 1949, £415,914; in 1950, £481,197; in 1951, £287,876; and in 1952, £328,562. These were the amounts taken off the hard earnings of our people through depreciation of the securities in which the deposits in our Post Office Savings Bank and the money from the sale of saving certificates were invested.
Where have we this money invested?Of course, I take it the financial experts were called in to tell the Irish people where the money should be invested. I find that there is £1,100,000 invested in Exchequer Stock in England at 2¼ per cent.; £2,000,000 in Consolidated Stock at 2½ per cent.; £500,000 in Funding Stock at 2½ per cent.; £454,000 in Savings Bonds at 2½ per cent.; £900,000 in National War Bonds at 2¼ per cent.; £1,000,000 in National War Bonds at 2½ per cent., making a total of £5,954,000 of the people's savings invested in British securities. I do not want to bore the House with figures, but we have £12,391,052 invested at 3 per cent. in Funding Stock, Savings Bonds, British Electricity Stock and British Transport Stock, and £10,682,170 in Conversion Stock at 3½ per cent.; £2,464,850 in War Stock at 3½ per cent.; making a total of £13,147,420; and we have £4,450,000 in Consolidated Stock at 4 per cent.
Does anybody think that that money is in safe hands when we are depending on British securities to give us a return for our money? Surely the Minister knows as well as I do that since 1931 England has defaulted on a £840,000,000 loan from the United States; that she has got £6,600,000,000 on lend-lease from the United States; that she has got from the United States upwards of £10,000,000,000 and paid little more than sixpence in the £. That is the currency we are expected to defend and support. Is it any wonder then that people would be wondering what will become of the country if we continue in that fashion in regard to the money which we invest? We have to pay 5 per cent. interest on money for building houses for our people.
A young man came to me last week who is thinking of building a house. I rang up a certain building society and asked what were the conditions under which this young man and his pal could build two houses for themselves. I was told what the conditions were and then I asked what was the rate of interest and was told that it was 6 per cent. I suggest to the Minister and also to Deputy Mulcahy that the first thing we have to do is to sit down and decide on making the Central Bank a bank forthe people of this country and give it the necessary powers to create money for developing our natural resources.
A few weeks ago I saw a letter published in the papers from the Minister for Industry and Commerce to the Waterford Harbour Board informing them that he would give a grant of £200,000 to them if they could get the Kilkenny County Council, the South Tipperary County Council and the Waterford County Council to guarantee the repayment of a loan of £132,000. The three county councils met and decided to guarantee this money. Why could the Government not monetise the credit of these three county councils and issue the credit to the Waterford Harbour Board rather than pass it on to the banks, who will not lose 1/- and who will draw interest on that money for the next 25 or 30 years? I want to know is State credit superior to bank credit. Does the citizens' credit gain anything or increase in any way by being written in bankers' ledgers which are privately owned and then issued back to the citizens as a debt?
When we talk about issuing money and credit, let us be clear on this fact, that the money issued is based on the credit of our people and on their capacity to produce goods and services. What is preventing us from doing the things I suggest we should do? I listened to Deputy Costello's statement and I should like to say to him that while he is giving this matter serious study, he thinks and believes, so far as I can judge, that he can operate the present system in the interest of the people. He cannot, and this Government is failing to do so, as Governments in the past failed, because they have not got the necessary power to deal with the credit of this country. The sooner we face that issue, the less time we will spend here talking in circles.
The Minister said that if we had a fiduciary issue, it would be disastrous, and he talked about inflation. I want to suggest that there is no inflation, so long as we have so many thousands unemployed wanting food, clothes, houses, furniture and many otheressentials. There is work to be done, work of importance to the country, and we have the men standing idle. Why are they not put to work? Is it not because the Minister is powerless and helpless because he has not got control of the essential factors? I do not believe it is going to solve all our problems, but the first thing that requires to be done is to get control of our credit and of the issue of our money and to give the Central Bank the power it should have as a Central Bank for the country.
The Minister for Finance in 1949 made the very deliberate statement that we had lost in one year alone £120,000,000 because of the devaluation of the £. I have asked him on two occasions to confirm that and to explain it to the people and I am asking the Minister now to say whether that is a falsehood or a truth. I believe it is true. Deputy Declan Costello—I can picture his desire to do and to say the right thing—said it was impossible to ascertain the amount of our sterling assets abroad. I suggest there is no check whatever on the movement of money in and out of this country. It is possible to transfer money out of England into Dublin or Cork as easily as people in London can transfer it to Liverpool. There is no check whatever, and, if anybody says that there is a separate financial system in this country, he is being dishonest with the people, because there is no such thing.
What about the silence of the Central Bank during the floating of the recent loan and the floating of previous loans? Does that not convey to any man who wants to think that the Central Bank has no banking functions at all in this country? If I had £100 or £1,000 to give to the Central Bank to-morrow, that bank could not take it from me. Why? Because the vested interests of the commercial banks saw to that and the people responsible for the Central Bank Act of 1942 succumbed to the dictation of the vested interests at that time.
Deputy Mulcahy talks about the Dublin Corporation loans, but I want to tell him that we have just asserious a problem in the Cork Corporation. Quite recently we floated a loan of £870,000 at 97 at 5 per cent. The corporation got only £756,000, but we have to pay interest on the £870,000 for the next 22 years. For that period the ratepayers of Cork will be paying £1,170 a year interest on money they never received. I say that the financial system we are trying to operate is immoral and unjust, and I say that deliberately. The banking system is robbing the children and the men and women of the country of the food they should be enjoying.
What do we find with regard to the cost of floating these loans? In respect of the flotation of the £15,000,000 loan in 1950, we paid commission to the stockbrokers of £27,550 and to the bankers, £81,364. The cost of issuing the bonds at 99 instead of at par was £150,000. In the case of the £20,000,000 loan in September, 1952, we paid commission to the bankers of £75,000 and to the stockbrokers of £50,000. Other expenses, including advertising, amounted to £11,700 and I should like to see that sum itemised. In the case of the £25,000,000 loan of 1953, we paid commission to the underwriters—I take it they were the bankers—of £93,750, and to the stockbrokers, £80,800. Other expenses, including advertising, amounted to £12,000. The cost of issuing it at 97 instead of at par was £750,000, making a grand total of £1,332,164 for a £60,000,000 loan.
We can pay to the hard-working, decent men and women, the old age pensioners, who served this country in hard times, only 21/6 a week and to a widow 20/- a week, if her husband was unemployed for long before his death, and 24/- a week to a widow whose husband was in employment at the time of his death. That is the system we are trying to operate. The time has arrived when we will have to assert ourselves. The challenge is there—let us accept it. The people want it. I can assure the Minister, as I did before, that the people who count in the country will not be found wanting in their support of anybody who seeks to do justice to the country and he can rely on thesebenches to give him all the support necessary to put this country in the condition in which it should be to-day.
There is such competition between the Government and the main opposition Party that there is a grave danger facing the country at the moment that anybody who has money to invest will be forced or driven to invest it outside the banks in this country. I think that is a very serious danger. All the discussions we have in this House, with the conservative Fine Gael Party trying to be more leftish than the Fianna Fáil Party or the Labour Party, are having a very disquieting effect on the people who have money in this country.
Did you say leftish?
There is a grave danger that money will be put into banks in Belfast or Britain.
They are doing it.
I want to point out to the House that there is a possible danger of that happening if the competition between the Government, the major Opposition and the Labour Party to see who will be most leftish or most Socialistic is going to continue.
It would not do a bit of harm if the Deputy was a little bit to the left himself.
He is neither right nor left.
It was the Government and the Opposition who appointed the directors of the Central Bank. What were they appointed for? Were they appointed to do a certain job? Were the Government and the Opposition satisfied that they selected the best people in the country to do that job? Is the only purpose of the directors of the Central Bank to serve as cockshots and excuses for every deficiency that the Government is responsible for or are the directors of the Central Bank to be used purely as a shield against the people of this country? I understand the directors of the Central Bank were originally put there by the presentGovernment and that they were reappointed by the inter-Party Government.
That was a mistake.
The inter-Party Government had an opportunity of changing them if they did not like them. I want to know from the acting-Minister for Finance, when he is replying, what are the functions of the directors of the Central Bank? Have they certain functions to perform? Are they capable people and are they the best people we could get? If they were not the best why were they appointed in the first instance by the Fianna Fáil Government and why were they reappointed by the inter-Party Government in the second instance? What do we want them for? Are they there as cockshots for whatever Government or whatever Opposition happen to be in the House at a particular moment? The principal reason why I stood up was to point out to the House the grave danger we may be doing to the country as a result of this competition for Socialism amongst all Parties of the House. That will have the effect of driving capital out of this country to be invested not in the Irish banks but in banks over which we have no control good, bad or indifferent.
You need not be afraid of Socialism, Deputy.
It is amusing to observe the consequences of the progressive disintegration of the Fianna Fáil Government. We now have four Ministers for Finance all of whom sing a different tune with the Tánaiste, as Minister for Industry and Commerce, providing counterpart but repudiating them all seriatim.Deputy Lehane is to-day gravely upset—and I sympathise with him—by the intervention of our latest Minister for Finance—Mr. Derrig.
Mr. Derrig went down to dine with the bankers and by his elephantine performance amongst the crockery he gave the bankers, and it would seem Deputy Lehane, neurasthenia and dyspepsia. I understand that the faces of the poor bankers at the end of thedinner had to be seen to be believed. Their applause was genial and cordial up to the time the fourth Minister for Finance had gone half-way through his manuscript and that from then on gloom descended on the party. I am sorry that that gloom has extended to Deputy Lehane. I agree that Mr. Derrig's elephantine performance at the bankers' dinner can have done little good but that is no reason for arguing that no one should ever use the delf on the dresser because the fourth Minister for Finance went down and behaved himself like an elephant in a china shop.
I do not see the point of having delf on the dresser if those who own the delf do not use it from time to time. Deputy Lehane will agree with me that there is a sound old custom in rural Ireland whereby one bought mugs of various pleasing designs wherewith to adorn the dresser, but there was always at least the fiction that on suitable occasions the mugs would be taken down and used. It was only a very eccentric person who filled the dresser with mugs that were never intended to be used and when a woman got to the stage that she filled the dresser with mugs that she never intended to use it was generally assumed she was getting odd.
I do not think there is anything Socialist or extreme in the Deputies of this House suggesting that the crockery we keep on the financial dresser of this country should be used when it is desirable to use it. The crockery on the financial dresser of this country is credit crockery. It appears to me that when we can use that credit to get houses for our people, to rehabilitate the land in order to increase its productive capacity, we would be fools to leave our people in tenement rooms and leave our land growing rushes and flaggers.
Does Deputy Lehane think that it is a Bolshevik proposal to drain the land? No. Does Deputy Lehane think that it savours of Stalin to make credit available to the farmers of this country at a rate of interest which will enable them to use it providently? Does Deputy Lehane think it isevidence of virtue and prudence to charge our farmer 6 per cent. for a loan of money to put up farm buildings, purchase stock or equip his dairy when the farmer in Great Britain can get it for 5 per cent. and the farmer in Denmark get it for 3 per cent.?
If the Central Bank is responsible for that have we not appointed them?
Deputy Lehane oversimplifies this problem. The Central Bank has certain functions. The commercial banks have certain functions. Dáil Éireann and Oireachtas Éireann have certain functions. Let all of us discharge the functions appropriate to our several callings and all will be well. Let the Deputy have no anxiety on this score. Any directions we give the Central Bank will be carried out by them. What is wrong is that the Fianna Fáil Government have been giving them the wrong directions.
Do not let us forget that when there was an inter-Party Government in this country it was told one morning by the joint stock banks of Ireland that they would not lend money to the Dublin Corporation to build houses for the people of this city. We did not shelter behind the Central Bank, or shelter behind anybody else, but we sent for the joint stock bankers of this country. We did not act in any dictatorial way, but we authorised the Minister for Finance to meet them and to discuss the matter very carefully with them and if, in the last analysis, they were adamant and refused to discharge what we, the Government of Ireland, considered to be their duty, we authorised the Minister for Finance to say to them: "Well, then, we will take steps by the authority of Oireachtas Éireann to make you do it," and when we told them that, we were prepared to do that if it were necessary to do it. They said: "The Dublin Corporation can draw their cheque to-morrow morning, Minister, and the money will be there to meet it" and at the rate of interest that we thought right, proper and equitable for thepurpose for which the money was required.
Compare that with this Government. The Dublin Corporation got that money at 3½ per cent. under our Government. The Fianna Fáil Government told the Dublin Corporation to go out on the money market and offer 5 per cent. and they did. Now, what did that mean when it came down to practical matters? It meant this: that Tom Murphy got married in 1949; he wanted to build a house for himself and his wife in which to rear a family. Tom Murphy went to the local authority and he was able, under the Small Dwellings (Acquisition) Act, to borrow money to build himself a house, and he found, when he had his borrowing done and his house built, that he had to pay 22/- a week over a period of 30 years in order to make himself the absolute owner of that house. His brother, three years later, got married, and he thought that he would do the same thing. He went to the same local authority and he borrowed the same amount of money to build the same type of house on a piece of land that had cost the same amount of money. But, remember that the cost of timber had come down in the meantime, that the cost of cement had come down, and that all the costs of building a house had come down, yet the second brother is paying 34/- a week, and will continue to pay 34/- a week for 30 years before he becomes the owner of his house. Why? Because Fianna Fáil said to the Dublin Corporation: "Go and pay 5 per cent. on the money," while the inter-Party Government said to the banks: "No, no, that money is wanted to enable our people to build houses for themselves and their children and they must have it at a rate which they can afford to pay." The difference between Fianna Fáil's policy on the rates of interest proper for money and the policy of the inter-Party Government is 12/- per week for 30 years on these two houses. Does Deputy Lehane think that we were Bolsheviks because we enabled one particular chap to have a house at 22/- a week, while his brother will, over the next 30 years, have to pay34/- a week for the same type of house?
That is the responsibility of the Central Bank.
It is the responsibility of the Government.
The only thing I said was that I did not see why the Central Bank should be attacked from all sides of the House.
The Deputy did not hear anyone on this side of the House attack the Central Bank. What we are attacking is this contemptible Government, at present in office, which have abrogated their functions and are seeking to shelter themselves behind the Central Bank. Does Deputy Lehane forget that, in the autumn of 1951, this was the Government which introduced a White Paper to say that they had taken over from a Party and from a Government that had been engaged on a spending spree, that the resources of the country had been dissipated right and left, and that they had to put their hands to the wheel in order to bring things back, lest they might find themselves, before the end of the financial year, in a situation where they could not get money to pay the civil servants' salaries.
Yes.
I am now going to read for Deputy Lehane what this contemptible Government, and Minister for Finance No. 3 of this grotesque Government, did say three days ago about a Minister for Finance whom he had described as a profligate in 1951. Here is what he had to say about that same Minister for Finance in Dáil Éireann three days ago. I am quoting from the Dáil Debates, Volume 143, No. 5, column 966. Referring to Deputy McGilligan, he said:—
"This gentleman, who was on easy street, who had money to burn and who never refused a penny for development, told Deputy Dillon to cut out the farm building scheme for which there was a sum of £250,000 provided——"
Deputy Sweetman interrupted to say:—
"You know very well that is not true.
Mr. Aiken: It was cut out; it was in the Estimate.
Mr. Sweetman: When Deputy Smith left the Department there were sacks of unopened applications.
Mr. Aiken: That was the excuse afterwards, but in the Book of Estimates there was this sum of £250,000 provided and Deputy Dillon cut it out."
Speaking at column 972, the present Minister said:—
"The gentlemen who now think that he was doling out the money to restore a proper balanced outlook should read some of the miserable penurious practices that he was guilty of back in those years in cutting down and stopping the development that Fianna Fáil was quite prepared to take political unpopularity of taxing in order to promote it.
I want, first of all, to quote Deputy Costello regarding the balance of payments. Deputy McGilligan found very virtuous excuses towards the end of his period as Minister for Finance for pursuing a financial policy which avoided the political unpopularity of imposing taxes to meet his bills but which had the result of handing on to his successors a large debt within the country, a debt to America and a large decrease in our net balance of external assets. It was only when they saw this large decrease in the balance of payments staring them in the face, because of their inflationary policy and before it became profitable for them to make a virtue of it, that they recognised it for what it was—a dispersal of the national assets that should have been properly husbanded and used for the national advantage."
I want to direct the attention of Deputy Lehane to this, that, according to the Minister, Deputy McGilligan was a mean penurious Minister, slashingappropriations for agriculture and other functions when Minister for Finance. I want to point out to the House that our Government in office gloried in our belief in the future of this country, and we believed—and we still believe—that scan the whole world for a safe place in which to invest your money and you will find none safer than the Republic of Ireland. I have reminded this House on more than one occasion that financiers of considerable standing all over the world desiring to find a safe domicile for their property, looked out over the whole world and finally landed in Ireland to take up their residence here for no better reason than they believed that the potentialities of this country were so great that they could find no better place in which to put their property than Ireland.
I want to say—and I want to glory in this—that our Government took the view that it was infinitely better to lend the savings of our people to our own people for the development of our land, for the provision of houses and hospitals for our people, at reasonable rates of interest than it was to lend that money at 1¼ per cent. to the British Government to reclaim land for the British people or to build houses or hospitals for the British people. It was the present Government which said we are not able to afford houses for our people; we are not able to afford hospitals for our people; we are not able to afford land rehabilitation on the scale that Deputy Dillon was doing it; it cost too much; but we are quite prepared to stand by and see the Central Bank of Ireland lend £62,000,000 at 2 per cent. and less to the British Government to build houses for their people, to reclaim and rehabilitate land for their people, until we reached the stage that we were lending money at 1¼ to 2 per cent. to the British Government to build houses for their people, in Armagh and Portadown, that our own Government of the Irish Republic said we could not afford to spend to build houses for our own people in Monaghan, Cavan and Donegal. Is that daft? Is that crazy? Can you ever imagine that a situation would arise in which it would be true to say that if aman living in Ireland wanted to build himself a house, if he built it under the British Government he could buy it for 22/- but if under his own Government it would cost 34/-? Is that daft? I think that is daft.
Is it crazy to lend money to the British Government at 1¼ to 2 per cent. to rehabilitate the highlands of Scotland while we think it is extravagant to rehabilitate the land on which our people live and get their living? Is there anything Bolshevik in demurring to that kind of thing?
It is here the kernel of this matter lies. It is not the quantity of money that our Government raises that matters primarily. It is on what our Government proposes to spend the money that matters. We raised money —and, please God, we will raise much more in the years that lie ahead—to rehabilitate the land of Ireland and to house our people. For what purpose do they propose to raise it? To rebuild Dublin Castle and the Naas Road. There is the kernel of the matter. If lunatics are to be found who are going to strain the credit of the community to rebuild Dublin Castle at a time when there are people living in the City of Dublin, five in one room, and unable to find any other place to go, ready and willing though they be to pay their rent, then indeed we may say that the Government of Ireland is gone daft.
Nine million pounds to rebuild Dublin Castle and the Naas Road! Millions everywhere, not for constructive developmental work but for relief work to provide temporary employment for those who have not emigrated! I ask Deputy Lehane to look back to three years ago when there were not enough pairs of hands in Ireland to do the work that wanted doing, and when there was not one penny spent on relief work, and when you could not get labour to do the work of a constructive character that we wanted done because everybody was employed. I remember when Deputy Michael Keyes was Minister for Local Government reporting to the Government that it was difficult to get Sligo County Council to acceptgrants under the Local Authorities (Works) Act because there were no men unemployed in their administrative area to work on the schemes for which the money had been appropriated.
Show me a county in the whole of Ireland to-morrow where you will find a local authority saying they would like the grants to be postponed because they could not find idle hands to employ for the schemes for which the money had been appropriated! What has happened? Why the change?
You know it is a good thing to be conservative and prudent. Everything I have got is in this country. If whatever property I have in Ireland disappeared to-morrow I would be a pauper begging my bread. Now, for the better safe keeping of whatever I have earned and put away I want to see this country developed, for if this country goes down all I have got goes down with it.
But this Government is going as fast as it can about the job of dissipating our resources on useless projects, while at the same time destroying the means our people have to replenish and expand the resources upon which our future depends.
Why did we ever go to the country to seek a loan at 5 per cent? The most abandoned banana republic in South America could raise money at less than that, and since that Irish National 5 per cent. Loan was issued in this country down to to-day it has never commanded a premium of less than 3 per cent. and has frequently been 4 per cent. Why should an Irish Minister for Finance have chosen to go on the money market at that time and fix a rate of interest in raising money for public use in this country which has had the consequences that I describe?
Deputy Lehane is now gone or I would like to pursue his financial education a little further. Would anyone in this House, including our Finance Minister No. 3, explain to me or to any other rational man, why is it good policy for the British Government to borrow £6,000,000,000 at 1¼ percent. Wherewith to purchase victory on the battlefield leaving after the expenditure, nothing, absolutely nothing, except broken tanks, exploded shells, used armaments and obsolete warships and aircraft, if it is criminal profligacy for the Irish Government of the Irish Republic to borrow money to build houses and rehabilitate the land.
I want to ask the Minister for Finance, No. 3, this categorical question: why is it wise for the Central Bank of Ireland to lend £60,000,000 to the British Government for such purposes while the Government of Ireland is required to pay 5 per cent., and the farmers 6 per cent., and the housebuilder 6 per cent for accommodation, not to buy armaments, not to buy shells that will disappear in gas and smoke, not to buy obsolete aircraft or obsolete battleships, but to build houses that will be there and will still be sheltering Irish families when the money has been spent, and to rehabilitate the land, the productivity of which will be going on long after every Deputy here is dead and buried? What virtue is there in making the purchase of the armaments of war as easy as we can, but the purchase of houses and of land so difficult and so expensive as to put them out of reach of the vast majority of our own people? Is it daft to do that? I think it is. The Party to which I belong thinks it is daft. What virtue does Fianna Fáil see in it?
Why is it that currency of Ireland is backed—mark the word "backed"—by the note issue of Great Britain when the note issue of Great Britain has merely an intrinsic worth exactly commensurate with the paper and ink that is used to print it, and no more? How do you back the currency of a creditor nation, such as we are, with the paper currency of a debtor nation, such as Great Britain is? How is it that if you hold in the Central Bank £1,000,000 worth of British Treasury Bills or British Government Stock it is perfectly legitimate to issue £1,000,000 Irish bank notes? But if you hold in the Central Bank £10,000,000 of Irish Government Treasury Bills or £20,000,000 of Irish Government Stock you cannot issue an Irish bank note for three-ha'pence. Now, why is that?Why is it that any bank can present British Treasury Stock to the Central Bank of Ireland and draw all the currency they want on it up to the face value of the stock and yet we could present the whole National Loan of Ireland and, if the directors choose to refuse, they need not issue a single note against it? Why? Is not the Government stock of the Irish Government just as secure, just as likely to be repaid and just as likely to have the interest payments due upon it met, as is the stock of the British Government.
Is it not nearly time that we, Oireachtas Éireann, authorised the Central Bank of Ireland to treat the stock of the Irish Government not on a preferential basis, because in this context they are looked upon as a security, but pari passuwith the securities of the British Government? True, if truth be told, the Irish Government is a damn sight more solvent than the British Government.
Would legislation not be required to do that?
If I am to answer you frankly, I am obliged to admit, "Yes," but I am entitled to say that under the existing law there is a procedure whereby the initiative can be taken by the directors of the Central Bank, with the consent of the Minister for Finance, and part of the currency reserve can be used on the lines I have suggested. If we wish to do the things we ought to do, I think legislative measures would probably be necessary to widen the existing discretion. But, even in the state of the law as it is at present, there is ample scope for doing a great deal of what ought to be done.
Now Deputy Lehane has asked who appointed the Central Bank directors. I do not care who appointed them. Whoever appointed them, we reappointed them and we have no criticism to make of them. I want to make that clear and I think that is where Deputy Hickey makes a mistake. Every organ of State in this country has its due and proper functions. It is the function of Oireachtas Éireann to make the law. It is the function of the Government to lay down policy and tooperate it. It is not the function of the Central Bank. The function of the Central Bank is to protect the integrity of the currency and their duty is to report things as they appear to them.
Now, they speak as economists; they speak as persons assigned a particular task and their duty is to report and to advise. Deputy Hickey should have enough experience of life to realise that—he has held positions of responsibility in his time—if he appoints advisers he expects those advisers faithfully and honestly to tell him what they think, but he does not commit himself in advance to do whatever they advise him to do because, if he did that, he would not be appointing advisers; he would be appointing masters. The Central Bank is nobody's master. They have an advisory function. They have certain other statutory functions which they faithfully carry out.
Were they not given the power to act?
That is another story. There is no use giving them power to act if the Government of the country is so contemptible that they do not know how the power should be used and I have no reason to believe that the Government which issued the White Paper in 1951 would use such powers prudently, or at all. I invite the Deputy to recall the terms of the White Paper of 1951, which declared that this country was in imminent danger of a financial crisis, that there was no prospect of any contribution being made to the solution of that crisis by increased exports and the only way to achieve solvency was to cut down our people's consuming power, to reduce imports; in fact, to accept as proven that our people were eating too much and living too well and that the only way to save the country was to make them eat less and live lower.
Of course, the Central Bank was entitled to make its report.
It was not the Central Bank's job to run this country. It was the Government's job to run thiscountry and it was the contemptible, spineless, pusillanimous Government that came trotting into this House with their own White Paper—it was not the Central Bank's White Paper—to sell that proposition to the poor dupes in the Fianna Fáil Party and the four bluebells that have joined them since. It was with that authority that they removed the food subsidy; it was with that authority that they raised the cost of living on anybody and it was with that authority that they effectively did reduce our people's capacity to consume, that they did precipitate unemployment in our community and that they did cut down on all the projects that we had set in motion.
We are asking this House to compare the policy of us with that of our successors and to throw their minds back to 1951, when there were few pairs of idle hands to be found in the whole of Ireland, and to ask themselves to-day is there a town or village in Ireland in which there are not plenty of idle men looking for work and then to ask themselves the question, why; what happened? There is no use in public men getting up like Pontius Pilate to wash their hands and say: "‘A plague on both your houses.' I do not know but something has got to be done." That is no contribution to getting something done. It is time people in this country made up their minds that the hurler on the ditch is no damn good to anybody. There is no use in philosophising from the ditch that you want this one or that one or somebody to do something and saying: "I do not want the responsibility of doing it." Deputy Hickey has got to make up his mind what side is he on. Is he going to continue to allege that there is no difference between the policy of Fianna Fáil or the policy of any other Party or is he going to recognise that you cannot have power without responsibility, that you cannot do the things that have to be done if you do not take responsibility for doing them?
That is right.
We were not afraid to take responsibility and we are proudof the results of the work we did in collaboration with Clann na Talmhan, Clann na Poblachta and the Labour Party, in the inter-Party Government. If we were in Government again to-morrow we would want to do the same thing——
And a little more.
——with the same help——
And a good deal more.
——for as long as it took to achieve the ends that we had in view. There is no use in anyone thinking that these things can be done by hurlers on the ditch. They have to be done by people who are prepared to shoulder the responsibility and pull their full weight on the oar.
Yes.
I can remember that very often during the period of the inter-Party Government, for Deputies like Deputy Alfred Byrne, who was an Independent, and myself, who was an Independent, the burden of responsibility was perhaps heavier than for those who could share it with a Party organisation. There were times when decisions that the Government had to take in order to achieve the aims we had in view had to be sponsored and defended by men like Deputy Alfred Byrne. I am proud to remember that an old colleague, such as Deputy Alfred Byrne was, was never afraid to accept the responsibility when he felt that the power was requisite to do good work for the people of the City of Dublin. If everybody would undertake his responsibilities with the same dauntless courage as Deputy Byrne has so often done for the poor of the City of Dublin we could do wonders in this small country.
The Deputy is straying very far from the Estimate.
I do not know, Sir. I am just reminding Deputies that there is no use in finding fault with the four Minister of the Fianna Fáil Government if they are not prepared to share their responsibility for putting rightwhat the four Minister have put wrong. I am pointing out that Deputy Byrne, in my experience, was never afraid to accept that burden when it was his duty to undertake it and I am inviting other Deputies to take example of it. If they do, we can make good headway when we get rid of this bunch.
Reading the speech that you made on the 14th February, 1951, I do not think you are prepared to take responsibility.
When Deputy Hickey gets reading what I have said here to-day he will be astonished to discover what a conservative old gentleman he is as compared with the radical views that I am sponsoring now for his edification.
I am not as conservative as you are, Deputy.
Now I want to deal with some of the third Minister's lighter moments on the Appropriation Bill on the 25th February—Volume 143, No. 5. I have always known him to be a very stupid and ignorant man. I have known him to be a scurrilous man and I have known him to be that truly contemptible type of individual who would be a bully if he thought he could get away with it. I shall read out what he said here. No other explanation than the one I gave could conceivably justify him. He began by saying, at column 965, that, when the inter-Party Government was in office, Deputy McGilligan directed me, for the purpose of effecting an economy, to close down the farm buildings scheme, for which Fianna Fáil had provided money and that I had closed it down and that that economy was effected. Such dauntless impudence has rarely been attempted in this House but, lest an attempt should be made to repeat it, I direct the attention of the House to Volume 112 of the Official Reports for July, 1948, column 595, where I exposed this fraud before. I am there reported in the following terms:
"I want to say something about farm buildings. I am told that I came in here to mislead the Houseand that my concern was falsely to suggest that the reason why the farm buildings scheme was being held over for the constructional work until next year was because there was a shortage of supplies. The most strident accuser was Deputy Smith. The only difference between Deputy Smith and me in regard to this matter is that I came in and told the House the truth and that Deputy Smith came in with exactly the same information and told them what was not true. Deputy Lemass is now as quiet as a mouse. Why is he as quiet as a mouse? Because I have a letter from him forbidding Deputy Smith to put a stone upon a stone in 1948, and I am going to read it:—
‘9th December, 1947
‘Dear Paddy,
A reply is being sent by this post to your Department's minute of the 4th December regarding your scheme of grants for the improvement of farm buildings. You will see that the reply sounds a note of warning regarding cement supplies. Though the cement factories are in full production, the demand is more than the supply and difficulty is being experienced in getting cement for the building and engineering work at present in progress. The shortage will, I fear, be more than a temporary one. We shall try to make supplies available, but it would be impossible for us to give you an assurance that you will get your full requirements for your scheme even on the restricted basis which you propose for 1948-49.' "
Now, Deputy Aiken, the third Minister for Finance, has the brazen-faced impudence to get up in 1953 and allege that the postponement of structural work on the farm buildings scheme in 1948 was due to the penurious misery of Deputy McGilligan, Minister for Finance, who directed me to suspend structural operations under that scheme in order to have money for the Budget of that year, Deputy Aiken, the third Minister for Finance, having before him the letter from the Tánaiste, Deputy Lemass, towards Deputy Smith when he was Ministerfor Agriculture telling him that he (Deputy Lemass) would not let him put a stone upon a stone. When I was Minister for Agriculture the Minister for Industry and Commerce did not send letters like that to me. If he did he would have got them back; but this was the kind of letters that were sent then, and the fact that they were then sent does not seem to me to be a good reason for Deputy Aiken, the third Minister for Finance, getting up and offering what seems to me to be an untruth in this House with regard to his predecessors in office.
But he did not stop there. He said that the scheme for the exploration of minerals was stopped. The scheme for exploration of minerals was stopped temporarily because we discovered that, through the ineptitude of our predecessors, they were exploring for minerals on land that belonged to somebody else, and pouring hundreds of thousands of public money into prospecting on land which, if it turned out to contain minerals, would be immediately claimed by the people who owned it. We took the commonsense precaution of buying the land or the title to the land or the right to secure the title to the land before we spent any more public money prospecting as to whether there were minerals on it or not.
His next trouble was that he put down £250,000 provisionally in the Estimate for 1947-48 for the subsidisation of fertilisers. Now I will issue this challenge to the third Minister for Finance, and I ask Deputies to note it because he will not reply to it because he is a mean and contemptible man—I ask him to produce for the 17 years they were in office, from 1931 to 1948, the annual provision in each year that was made for the subsidisation of fertilisers, and to tell the House in respect of each year how much they spent out of that proviso. I bet you that he will not give the House that figure, but I challenge him to give it. I want to make our position perfectly clear on that. I advised the Government of which I was a member not to give one penny subsidisation to fertilisersuntil we disposed of means of guaranteeing supplies of fertilisers to our own people at the lowest possible penny, for I did not want to see a subsidy provided by our Government for the relief of farmers going into the pockets of the fertiliser manufacturers. We did provide the lime subsidy scheme, and though Fianna Fáil may rage, storm and snort and scream about that, the facts speak for themselves. Res ipsa loquitur.In 1947 there was not as much ground limestone in this country as would fill an egg cup. In 1951 it was being delivered to the gate of every farmer in Ireland at 16/-a ton no matter where he lived.Res ipsa loquitur;and they can talk about those facts until the cows come home. The people knew that there was no lime and they subsequently saw it in abundance at their gates wherever they were.
But that is not the end of the impudent folly of this extraordinary man. He says at column 967:—
"There was another scheme, the farm improvements scheme. We estimated that we would spend a sum of £350,000 on that."
He charged me with winding it up. I did, to make way for a scheme under which we planned to spend £40,000,000 on the land of Ireland, the land rehabilitation project. That is the project they thought they could wind up when they came into office. That is the project they tried to wind up when they came to office and they found the people would not let them. That is the project that made provision for the people of Connemara which Deputy Bartley said Fianna Fáil would wind up the morrow after they got office; but they did not wind it up and they dare not wind it up; and it was our substitute, our incomparable improvement on the bog farm improvement scheme of Fianna Fáil.
Now I want to come to a paragraph in the third Minister for Finance's observations to which I wish to draw the attention of the Ceann Comhairle particularly. At column 968 he said:—
"Some farmers down in Limerick thought they could approach Deputy Dillon for an increased subsidy. They were met by him and instead ofgiving them some of this money which Deputy McGilligan, then Minister for Finance, had to burn, he told them to go home. He said they were ‘lazy, ignorant crompauns', ‘a lousy lot of bowsies,' to be looking for money from him. These were his exact words.
Mr. Davin: What is the Minister quoting from?
Mr. Aiken: I am quoting from the daily papers of the date.
Mr. Davin: On a point of order.
I want the reference. The Minister is purporting to quote.
Mr. Aiken: I will get the exact date for the Deputy. Everybody in this Dáil recognises the language of Deputy Dillon. They remember the incident as well as myself.
Mr. Sweetman: Is the Minister going to give the date?
Mr. Aiken: I will.
Mr. Sweetman: Let us have it.
Mr. Aiken: You will get it in time.
Mr. Sweetman: On a point of order. Is it not an order of the House that when a quotation is given that is the time at which the reference and the date of the quotation must also be given?
An Leas-Cheann Comhairle: That is so.
Mr. Sweetman: Will you direct the Minister then to comply with the order of the House?
Mr. Aiken: I have not got the date.
Mr. Sweetman: Then withdraw it until you can produce it.
Mr. Aiken: Will Deputy Davin put down a parliamentary question about it?
Mr. Sweetman: On a point of order. You, Sir, have ruled that the reference must be given at the time when the quotation is made. Will you ask the Minister to give the date of the quotation——"
Deputy Allen came to the assistance then and said:—
"It was not a quotation."
He said:
"I am quoting from the daily papers of that date."
We are not going to reopen that incident. The Deputy should have raised it at the first opportunity.
I am going to open it and to answer it now.
I am referring to what has been said by Deputy Allen.
Deputy Allen is trying to heel tap for Deputy Aiken.
I am not dealing with that particular incident. Deputy Allen made an interjection.
The Minister for Finance was in it up to his neck and what Deputy Allen was doing was trying to come to his assistance but he got up to his neck himself.
My neck was well over the water.
Well, your nose is just above water. The Official Report continues:—
"Mr. Allen: It was not a quotation.
Mr. Sweetman: ——or withdraw the phrase until he can do so?
Mr. Cunningham: He did not say he was quoting from anything."
Alibis were flying around the Dáil from all quarters at this stage. The report goes on:
"Mr. Cunningham: He did not say he was quoting from anything.
Mr. Sweetman: He did.
An Leas-Cheann Comhairle: If the Minister states he is quoting, then it is usual to give the reference. If the Minister has not the reference now, it will be in order if he gives it later.
Mr. Davin: I raised this as a point of order because I do not believe that some of the words that he hasquoted were ever used in this House and, if they were, the Chair should have called on the person concerned to withdraw them.
Mr. Aiken: I did not say they were used in this House. I said they were used to the Limerick farmers, and I will quote the words slowly and deliberately so that the reporter can take them down."
These are the words Deputy Allen has just said were not a quotation; these are the words Deputy Cunningham said were not being quoted:—
"Mr. Sweetman: Are you, Sir, going to allow the Minister to flout the ruling of the Chair?
An Leas-Cheann Comhairle: The Minister will not be allowed to give the quotation without the reference.
Mr. Aiken: I will give it on the token Estimate. I am glad to see Fine Gael and the Labour Party running away from Deputy Dillon's language and the fact that he tried, at a time when the ex-Minister for Finance said they were on easy street and had plenty of money, to get the farmers to produce milk at 1/- per gallon.
Mr. Sweetman: Owing to Deputy Dillon's policy you lost 12 seats in the West of Ireland."
That, remember, was the origin of the Bill, Na Ceantair Cúng. Then Deputy Aiken left the topic of his quotation. I have since been waiting with some interest to see if this absurd creature would produce the quotation which he promised the Leas-Cheann Comhairle he would produce on the token Estimate. He has not done so though he has had ample opportunity to do it. He says they are the exact words that were used. He rebukes Deputy Allen and Deputy Cunningham for saying they were not a quotation. He says they were a quotation and he says: "I said they were used to the Limerick farmers, and I will quote the words slowly and deliberately so that the reporter can take them down."
Where is the quotation? I challenge him now to produce the words. I say he spoke an untruth. I say he acts the part of a coward if he does not produce the quotation or apologise. I say he trespassed on the Leas-Cheann Comhairle in undertaking to produce it and being excused from its production there and then on his undertaking to produce what he sought to run away from. I have always despised him. I invite his colleagues to despise him now.
I read the rest of what Deputy Aiken said on that occasion and I do not think it is worth following because it is perfectly manifest he did not know what he was talking about. However, I want to refer to another matter of consequence and it is the oft-repeated allegation by Deputy Aiken, the third Minister for Finance, and his colleagues, that when they took office they found they were left with debts. We compelled the Taoiseach to withdraw that allegation in the country and to confess that there were no debts but that he found on the table of the Minister for Finance, left by us, £24,000,000 sterling in cash.
In sterling assets.
No, £24,000,000 cash of the Loan Counterpart Fund of the Marshall Aid scheme and £6,250,000 of the Marshall Grant Counterpart Fund —that they still retain in cash £6,250,000 with accrued interest and that they spent in five months the £24,000,000 cash we left them and which they could have, if they wanted to, brought round to the American Ambassador's Office and handed to him in reduction of the Marshall Aid loan that we had negotiated over the three years we were in office.
The Taoiseach confessed in the country that that was a fact, that there were no debts left, but he said there were commitments. Yes, there were commitments, millions of pounds worth of commitments, which were proudly left after us. Show us of all those commitments a single one which Fianna Fáil has dared to bring into this House to cancel. There was not one of them that they could not havecancelled the morning they came into office. Show me a single one they brought into this House to cancel.
I will show them now a catalogue of the commitments they left us. They were brought into Dáil Éireann in our term of office and cancelled. I will remind them of the £12,000,000 of the first National Loan which we negotiated in 1948; £10,750,000 had to be used up to liquidate their debts and not their commitments. Of the first National Loan we raised there was less than £1,000,000 of free money for us to use—let that be; we were able to handle that. But we found commitments, the first amongst them being to produce Constellations with which to fly across the Atlantic whatever high-heeled ladies wished to fly. Do you remember the Constellations? Do you remember our coming in here and telling Dáil Éireann: "They will never fly so long as our people are living in tenement houses; so long as tubercular patients have no beds in which to lie; so long as the land requires rehabilitation and the work is not being done. We will use the resources of this State for these purposes before we provide Constellations to fly high-heeled ladies wherever they want to go." That was one of the commitments we cancelled.
We found another commitment, the very model for which had cost £1,500. It was the model of a plan to rebuild Dublin Castle and the Board of Works told us that plan would cost close to £9,000,000 sterling. We brought that commitment into Dáil Éireann and cancelled it because we said: "Before we put the building industry to work on rebuilding Dublin Castle at a cost of £9,000,000 we will house the people and we will provide them with hospitals and we will rebuild the farm buildings of the country that require to be rebuilt." We had another commitment.
You cancelled the farm buildings scheme, too.
No, sir. I read that story.
You were made keep to it.
Wait a moment. I am only at the beginning. Wait till I tell the story of the bus station—which was to be a bus terminus and was to provide new office accommodation for the headquarters at Kingsbridge. C.I.E., who were to build and pay for it, notified us that they had cheques written wherewith to pay their bills lying in the safe at Kingsbridge and they were afraid to issue them for there was no money in the bank to meet them. They had Store Street standing like a steel skeleton and they had not the money to pay for the glass to go in the windows or the cement to bind the stones. The proposal was submitted and considered by us that we should abandon Store Street because there was no money to finish it, no money to pay for putting the roof on. It was a question as to whether the steel should not be taken down and sold for what it would fetch. It was then that our Government said: "No; there has been a lot of money put into that; we will take it over from C.I.E. and let the bus station go in the basement and let the civil servants go in the top loft and then we need not rebuild Dublin Castle from the basement up; we need not abandon Store Street but let C.I.E. get along in Kingsbridge until at least they are able to earn enough money to pay the cheques they had issued in liquidation of their debts." Were we right to cancel that commitment? Were we right to enable the bare skeleton that was bequeathed to us by Fianna Fáil to be covered and clothed in a building? Or should we have said to C.I.E.: "You have not money to pay for the coal to fire the engines to draw the trains, but go ahead and finish Store Street; it will only cost you £3,000,000."
The commitments that were left to us by Fianna Fáil we brought into Dáil Éireann and we cancelled them. Come, now; let Fianna Fáil show me a single commitment that we left them which they thought it right to bring into Dáil Éireann to cancel. They dare not. Let them deny it if they dare, that they tried to cancel the land project and they recoiled from the public fury that greeted their attempt.
They did not cancel our commitments because they were good commitments. We have no apology to make for our commitments; we were proud of them and I want to tell this House and the country now that what we yearn for is an opportunity to resume the work that we were doing. Remember, the fruits of that work are shown by the results to date.
Do not let us forget that in 1947 the total exports of this country were less than £50,000,000; they will exceed £105,000,000 sterling in this year of grace. Do not let us forget that in 1947 there were less cattle, less sheep and less pigs in this country than at any time in the 20th century; while to-day there are more cattle than there have been for 50 years, sheep are back to the pre-war number and pigs are close approaching it. In the current year more milk was produced for manufacture in Ireland than at any time in the history of Ireland, with the sole exception of 1936. Now, cows give milk in their third year. Do a little calculation.
Deputy Mrs. Rice grieves with me that the women of Monaghan have to sell their turkeys for what they can get for them now. I remember, when I was Minister for Agriculture, the dutiful spur my distinguished colleague was on me—how touchingly she used to rise in these benches and how distressed I always was to observe her concern and grief for the women of Monaghan. I remember that the burden of her complaint then was that she understood that some of them were being put off with 3/10 per lb. instead of 4/-.
I do not see how the price of turkeys comes into this. The Deputy will find it difficult to make it relevant.
All I want to do is to assure my distinguished colleague, Deputy Mrs. Rice, that if she should lack a speaker for any public demonstration she proposes to summon in Monaghan, now that turkeys are selling at 2/3 per lb., she can confidently depend on me.
We left no debts, but £30,000,000 in cash; they spent it. We were able to raise all the money our people required for the development of this country at 3 and 3½ per cent.; they give the moneylender 5 and 4¾ per cent. We were able to give houses to our people at 22/- per week; they want 34/-. We were able to employ every pair of idle hands in Ireland without providing one single relief work; we did not ask them to take relief work, we offered them jobs developing their own country for their own people. They were proud to take them and to do good reproductive work for the wages they were paid. Is it any wonder that we move to refer back the Vote of this financial bedlam that Fianna Fáil calls policy? Is it any wonder we move to refer back the Vote which the third Minister for Finance seeks to justify to this House by an outline of policy that we have never heard before?
I invite Deputies to turn back to the speech I made on the White Paper of 1951 and the Budget of 1952. The only mistake I made then was that I foresaw the future a year too soon. Apply the words then used about the end of the financial year 1952-53 to the end of the financial year 1953-54 and the picture begins to emerge just as I painted it then—the shuffling, the new Taoiseach, the Minister for Finance disposed of, the rival driven from the fold, the new Taoiseach distributing benefices and looking for allies to become the head of the Party in the middle of the road. I am telling the House the truth. The finances of this country, the economic life of this country and the fortunes of our people have been prostituted by Fianna Fáil to the service of a dirty political ramp which they are operating in the hope that its development will insulate them from the consequences of the impending retirement of the Taoiseach, Deputy de Valera. It was an ugly deal from the time it was initiated and I first exposed it in this House. The absorption of the three bluebells is the second step in the scheme to present a useful front to the new situation.
This does not seem to be relevant.
It is the purpose of this financial policy.
This is a discussion on the financial policy of the Government.
Yes, and I say the financial policy of this Government was oriented to no more dirty end than a political manoeuvre to build up a political organisation with which to survive the shock of Deputy de Valera's disappearance from the public life of the country. That is my express indictment.
It is not an indictment of the Department of Finance and the Minister.
It is an indictment of their policy. This is a motion to refer back the Estimate for reconsideration.
I am not concerned with the alleged political manifestations of that policy.
The Chair will excuse me if——
I must direct the Deputy's attention to the fact that his remarks must be relevant to the Estimate which is before the House for consideration.
I suggest that while we might properly discuss economic policy in this House in the atmosphere appropriate to it, it is simply self-deception to disguise the policy of this Government as a financial policy. It is not. It is a Party political racket which has been played at the expense of the standard of life of our people and the fortunes of our country. It is not the first evil thing Fianna Fáil have done in the public life of Ireland but let me say that I hope it will be their last. Let us recall that this is the third time Fianna Fáil have got this country into their control in a reasonably solvent and progressive state and reduced it to a condition of very grave crisis. That can be done once too often. No State in the world can survive a group of politicians who bring upon it in onegeneration a Civil War, an economic war and, finally, a dollar war.
The Deputy will have to confine himself to a discussion on the Estimate which is before the House. He is not confining himself to the Estimate now.
In my submission, the policy we at present witness is the policy which I chose to describe as Fianna Fáil's dollar war on this country. It is designed to do the country as much injury in its time as their previous activities have done. I am warning this House that that can be done once too often. There is no use in doing that kind of thing and then handing over the country in a state of wreckage to someone else to clean up and then grabbing it back again to reduce it to misery once more. I am happy to think that this is the last time Fianna Fáil will have the chance of wreaking the havoc which it has wrought in the past. I say God speed the day that they will go to the country and allow those of us who are prepared to accept responsibility to reverse the policy that we condemn at the present time and get back on the road to the kind of progress our people are entitled to expect in their own country.
The recent change of front by the Government, as enunciated by the Minister for Lands in his speech at the bankers' dinner last week, affords us an opportunity of asking in what direction Government policy is aimed.
I want to remind the House of the circumstances in which the present Government initiated its financial and economic policy in June or July, 1951. When this Government was elected, it laid down its programme under a number of headings. It criticised the policy of the inter-Party Government on the grounds that it was a spendthrift policy, that we had squandered the resources of the nation, that we had engaged in a spending spree and that we had put the country into debt. During portion of the period of office of the present Government, signs were erected on the hoardings throughout the city bearing the symbol which isassociated with the pawnbrokers' business. Although that notice was not issued in the name of the Fianna Fáil Party, they have never denied responsibility for it. It was common knowledge that these posters were issued at that time by the Fianna Fáil Party.
The Fianna Fáil Party criticised the economic policy of the inter-Party Government and for that reason they embarked on a programme which was radically different from that which the inter-Party Government implemented. During the autumn of 1951, members of the present Government delivered numerous speeches at different functions, in this House and throughout the country, asserting that a serious situation had developed and that—to use the words of the Minister for Finance of the time—a crisis had been reached bordering on despair. During that period, we expressed the view on many occasions that, although our balance of payments had temporarily got out of line—due to excessive stockpiling arising out of the Korean war and the substantially increased prices being paid for imports—the position would rectify itself, given time. In an attempt to demonstrate the fallacy of the views expressed by the Opposition at the time, the Government published a White Paper in the autumn of 1951. That White Paper, which the Minister for Finance issued, expressed the view that there was unlikely to be any substantial increase in exports. In particular, it referred to agricultural exports. It is well to reflect that in 1947, when the Fianna Fáil Government was last in office, the total value of our exports amounted to £39,000,000. Last year, they reached over £100,000,000 and this year they will be greater still. That was accomplished as a result of the policy initiated by the inter-Party Government.
During the term of office of the inter-Party Government a number of trade agreements were made which enabled our farmers to get a remunerative return for all their agricultural produce. The result was that, coupled with the capital development programmeand the trade agreements then made, the country benefited to a considerable extent by having available remunerative markets for exportable produce. Although Fianna Fáil were criticising that situation in the autumn of 1951, we asserted that, given time, it would rectify itself. We recognised that the abnormal circumstances associated with the Korean crisis meant that a great number of importers of a variety of goods were seeking to stock up against possible deteriorations in the supply position. Those circumstances were not peculiar to this country. Other European countries and countries outside Europe were all faced with the same position, that there was a rush to buy goods. We asserted at the time that, because the Government embarked on that policy and because of the crisis speeches being made, an actual crisis would be created.
In a short space of time we had drastic reductions in credit. We had a slump in business, a drop in trade and for many months we had a substantial reduction in industrial output, a reduction that has only been arrested this year. We asserted that because of the mistaken diagnosis of the ills affecting the country they were operating a mistaken policy; that the remedies they were applying, the arguments they were using and the panic speeches that were being made, would inevitably create a crisis that would have far-reaching repercussions. Those prophecies have been justified by the events that have followed. We have seen a substantial rise in unemployment and a serious drop in business in many respects. We have seen a restriction of credit. When we asserted that this restriction of credit was affecting business and development schemes of different kinds, the Government's answer was that they were not responsible for it. Numerous Ministers quoted the bank advances to demonstrate the alleged weakness of our arguments but they neglected to appreciate that the mere fact that bank advances are up, is no argument to refute statements that there was, and that there is, a restriction of credit. In the mere statement that there were increased bank advancesthis year over last year or last year over the previous year, there is a failure to recognise the fact that during every one of those years there was a substantial increase in the price of raw materials and a substantial rise in the needs of business and commerce for more money in order to carry on the same amount of business or to meet similar commitments, without even considering any expansion. It was only this year when the figures demonstrated a reduction in the amount of advances that there was an admission that there had been a restriction of credit.
What has that restriction of credit meant from the point of view of business people and of work generally? It has meant a drop in industrial output, and a reduction this year in the published figures of those employed in certain industries compared with 1951. Although there has been a welcome improvement in recent months, which we hope will continue, it does not take into account the large numbers that have been obliged to emigrate or who have been forced, because of the problems which affect many industries, to go on half-time or short-time.
Now we have had, or we believe we are about to have, a change in policy. It is well to reflect on the circumstances which caused the Government to pay last year 5 per cent. for the national loan. That meant in the case of loans to build or to buy houses under the Small Dwellings (Acquisition) Acts an increase in the weekly commitments, the monthly commitments and the annual commitments of a section of the community who should be encouraged and assisted, a section of the community who are often referred to as white collar workers. Whatever description may be applied to them, they are a section of the community who by their thrift, their own initiative and their own hard work are prepared to acquire or to build houses for themselves and their families. During the period of office of the inter-Party Government and right up to last year, it was possible for these people to get advances under the Small Dwellings (Acquisition) Acts at 3½ per cent. Last year when the interest rates went up, the rate of interest on these loansincreased also and these people are now obliged to pay 5, 5¼ and in some cases 5½ per cent. because not merely has 2 per cent. been added to the rate of interest but under the Acts those advancing the money are entitled to charge ½ per cent. for ordinary administration.
That deterioration in the position has meant an increase in the weekly outgoings varying between 10/- and 12/6 a week. That is a substantial burden on a section of the community who have already been hard pressed, a section who have been affected by every increase in taxation, who have to meet a substantial rise in the cost of living, who are obliged to bear the added burdens imposed by the Budget last year and continued this year, and many of whom have fixed incomes. These people who have borne almost all the burdens, without any alleviation or any lessening of the weight of taxation, were faced last year with an added burden in respect of the increase in the rates of interest on loans under the Small Dwellings (Acquisition) Acts. We asserted then that that was caused by reason of the fact that the Government mistimed floating the national loan.
I need not quote here lengthy statements by experts. Suffice it to say that in recent weeks a person who was formerly regarded as the exponent of the financial policy of the Fianna Fáil Party expressed the opinion in the Statistthat, because of the mistiming of the loan, substantially increased burdens had to be imposed and a substantially higher cost had to be paid for it. We pointed out at that time that if the Government had gone for the loan in the autumn of 1951 they would have got, if not all their needs, at least portion of them at 3 or 3½ per cent. and that they could have supplemented that by drawing on the money which was left in the Loan Counterpart Fund of Marshall Aid. We had used these moneys in order to make up the differences between what was provided from money raised by way of loans here, and what was required in order to meet capital expenditure in any particular year.
It is not, however, for the purpose ofcontrasting what was done by the inter-Party Government with what was done by the present Government that I want to direct the attention of the House to some matters. People want to know what is going to be done now. Although the recent loan was floated at very favourable terms from the point of view of the interest rate, there has been no reduction so far as borrowers under the Small Dwellings (Acquisition) Acts are concerned. They are still obliged to pay over 5 per cent. I think it is reasonable, in view of the State subventions to housing and of the fact that housing has been the subject of considerable borrowings over a great number of years, that those people who are paying that substantial increase in the rate of interest should get the benefit of any improvement in regard to the raising of money. In fact, I believe that the equitable way of dealing with this matter would be to average out the total payments over a period and that those persons borrowing money under the Small Dwellings (Acquisition) Acts should be entitled to the more favourable terms on which the Government and, consequently, the local authorities are enabled to get money for housing purposes and that people who are already bearing a substantial burden should not be further penalised by the excessive rate at which the previous national loan was floated.
At the same time as we criticised that policy we asserted that there was and that there would be a reduction in the construction and house building programme. Taking local authority housing alone, it is no answer to quote the figures for houses constructed last year and to show that these figures were slightly over those of the previous year or that the figures for the previous year were slightly over those for 1951. The fact is that in almost every case all the houses completed either last year or the year before were planned, and work in some cases begun on them, before the financial policy of the present Government had time to have effect.
What is significant is that this year the June figures show that there are7,255 persons employed by local authorities on housing, including skilled and unskilled workers. The figures for 1950 showed that there were 13,077 persons employed on the same work. Allowing for the fact that some local authorities have completed or partially completed their housing programme, that drop in the numbers employed is significant and the tendency has all been in that direction. No accurate figures are available for private building, but it is common knowledge, and any builder will support the statement that I make, that there has been a serious drop in the number of houses built by private builders. That serious reduction, coupled with the substantial drop in the numbers employed on local authority housing, is reflected in the large number of persons registering at the employment exchanges who were formerly employed on building and construction work. I believe that that is due almost entirely to the restrictionist economic and financial policy of the present Government.
Allowing for the fact that in a few isolated instances the demand may have been met so far as housing is concerned, in the main, and especially in Dublin, Dún Laoghaire, Cork, all the larger cities and most of the big towns, there is still an unsatisfied demand for houses, either local authority houses or houses under the Small Dwellings (Acquisition) Acts. We need not worry greatly about people who are not availing of these facilities because they are not in any great difficulty. The bulk of the houses required, however, are either needed by people who are prepared to avail of the facilities under the Small Dwellings (Acquisition) Acts. These people now find that they have to pay more for the money borrowed and that has meant, so far as many parts of the country are concerned, a substantial reduction in the number of houses being built, and is the cause not merely of hardship on people anxious to build houses for themselves, but serious hardship for many families dependent on workers in the building industry. In addition,it has meant that a great number of those who were formerly engaged on that work have been forced to seek work abroad in order to provide for themselves and their families.
What the House and what the country wants to know is, does the statement made by the Minister for Land at the bankers' dinner mean a reversal in financial policy? I will not weary the House by quoting statements made by the present Minister for Finance when the inter-Party Government enunciated their policy. It is sufficient to paraphrase his words. He said that the banks were to be made cough up, although at that time the then Minister for Finance expressly requested the banks, so far as one loan was concerned, not to apply for any portion of it so as to allow people who were anxious to invest an opportunity of investing their savings in a loan which was being floated for capital development purposes.
In the last two and a half years we have seen a substantial rise in unemployment and a substantial rise in the numbers registering at the employment exchanges through the country. There are no accurate statistics available for those emigrating, but taking the figures for the passenger movements by sea and air, it is possible to get a reasonable assessment of the numbers going abroad. They showed that last year there were substantially more going abroad than in the previous year. The figures are not available for this year. Despite that situation, despite that deterioration in our economic circumstances, it is only at the very end of this year that we appear to have got any reversal in financial policy, any admission of the problems that have to be faced, any recognition of the steps that should be taken to effect an improvement.
I quoted recently in this House an O.E.E.C. publication which showed that for the first six months of this year the rise in the cost of living in this country was plus nine. I do not know on what that was based, but on the assumption that that body had available to them all the facts and statistics of the various member countries, it showed that the rise in the cost ofliving for this country was almost double that of the next highest country. In fact, with one exception, where the figures showed a rise of five points as against nine points for this country, it was more than double that of any European country. The cost of living now stands 14 points higher than it did during the inter-Party Government's term of office. So that in the space of two and a half years we have astronomical figures for unemployment, a reduction in the numbers engaged in house-building, a drop in industrial output, and the highest cost-of-living figure in the history of this country. That is the situation which we forecast would arise if the policies enunciated by the present Government were implemented. We forecast that, although a crisis was not imminent, if the speeches were persisted in which were creating panic scare, a serious deterioration in our economic position would occur. We expressed the view that the Government at the time were unwise in making these speeches and creating that situation.
We ask now, and the country is entitled to know, what alteration in financial or economic policy the Government proposes in order to deal with the serious unemployment situation, in order to lighten the burdens, in so far as tax burdens are affecting them, on the people who are obliged to bear these increases in taxation. The revenue returns show that revenue is running far in excess of what was anticipated in the financial statement published when the Budget was introduced this year. The people are entitled to expect a substantial alleviation of taxation, a substantial alleviation in the weight of taxation, under which the Taoiseach himself admitted the country was staggering. It has meant a slump in business, unemployment, serious misery, loss and privation for many sections of our community.
It ought not be necessary to have to wait until the next Budget to alleviate the hardships, to lessen the load and to lighten the weight for many of our people. It can be done now, if the Government are preparedto face the responsibility of admitting that their diagnosis, their policy and their programme were wrong and to take the only effective steps which can be taken by means of financial policy to remit the burdens, or some of them, which have been imposed and which have been borne for the past 12 or 18 months by many of the weaker sections of the community, by the sections of the community least able to bear the burdens imposed by the Budget of 1952 and continued by the Budget of this year. We will support any measure that will alleviate the hardships or lessen the loads which these people have been forced, and forced unnecessarily, to bear during the past 18 months.
If the speech of the Minister for Lands at the bankers' dinner is a recognition that the economic and financial policy of this Government has been misguided, that it has caused unnecessary hardship, that it has brought about a slump in business and unnecessary unemployment and has forced many people to emigrate, then, it is a recognition of the seriousness of the situation and it only remains for the Government to take, as they have power to take, effective steps to ease some of the burdens, to correct some of the mistakes and alleviate some of the impositions which the people have been forced unnecessarily, heedlessly, and wantonly to bear, burdens which were unjust and harsh and which caused much misery, much suffering and much unnecessary privation for many people who, during the period of office of the inter-Party Government, expected that, allowing for the ordinary improvements associated with a sound economic and social policy, they could look forward with reasonable hope and reasonable confidence to a fair degree of human happiness and prosperity.
I do not want to reply to the political points which were made in this debate. I want to deal with the technical financial points that I raised in my speech on the main Estimate and upon which I asked Deputies to comment. It is of the utmost importance that, when dealingwith a technical problem, we understand the fundamental principles involved. There is no use in blaming the holding of external assets for any ills that may exist in this country, if, in fact, the holding of these assets has no adverse effect and indeed helps us. When opening the debate on the principal Estimate, I stated this proposition, that it was not necessary to realise our external assets in order to increase the money supply at home. Speakers in the Seanad who addressed themselves to that proposition agreed with it. Deputy Declan Costello agreed with it and Deputy McGilligan, by inference, agreed with it, but wrapped up his agreement in a denial that it had ever been said by either himself or any of the people with whom he was associated that the holding of external assets abroad prevented an increase in the money supply here at a cheap rate of interest, a dear rate of interest or at no rate of interest.
I want to remind Deputy McGilligan that, as I pointed out in the Dáil on 24th November last, he himself spoke about the lending of over £60,000,000 to the British Government at 1½ per cent and about the obverse of that situation, the Minister for Finance charging 5½ per cent. for development here. Deputy Norton also spoke about investing money in Britain at 1½ per cent., with house purchasers here being charged 6 per cent.
Deputy Dillon thought we were all daft to invest, as he called it, through the Central Bank £60,000,000 or £70,000,000 while charging our people a big rate of interest. Deputy Norton also spoke about lending and investing through the Central Bank money at a cheap rate to the British and at the same time charging the people, local authorities and others high rates of interest for general purposes.
It was agreed in the Seanad and by at least one speaker on the opposite side that it is foolish to talk about lending and investing money through the Central Bank at a cheap rate of interest to England. All central banks and similar institutions hold a portion of the foreign savings of their nations as long as the nations have foreignassets, whether they be sterling or dollar. Somebody has to hold them. If we translated all our foreign assets into gold in the morning there is no one who would say that if we held that gold physically within the country it would prevent us having cheap loans here for national development.
Sterling assets, like dollar and other assets of all other countries, are savings or reserves. They are a demand upon the goods and services of other peoples. It is foolish to say that we cannot increase the demand upon our own goods and services, which is what an increase in the volume of domestic money is, and still preserve our present level of demands upon the goods and services of other people, which is what external assets amount to.
I pointed out before, and I wish to do so again, that some institution, individual or combination of individuals and institutions must hold our external assets so long as we have any. If we were to compel or induce the Central Bank in the morning to sell its sterling assets and bring the proceeds home in the usual way through the banks here, the result would be merely to swell the external assets of the commercial banks by an equivalent amount. That is so clear, when it is examined, that it can only be through a lack of study of the matter or form some political motive that Deputies, Senators or anybody else would go round the country pretending they knew something about finance and prating about investing Irish money in British securities through the Central Bank. It holds portion of our national reserves. Somebody must hold them.
I do not think it would be a good thing to force or induce the Central Bank to hand over those external assets, sterling or otherwise, to the commercial banks. Instead of going in that direction, other countries have by law prohibited their commercial banks from holding foreign assets and they have also forbidden by law in certain circumstances their ordinary citizens from realising their external assets. In fact, they have made them register and sell them to their domestic Government for domestic currency.
If we were to pass a law forbidding the Central Bank, the commercial banks or individuals from holding our external assets we would have to set up another institution to hold them. We would have to set up some institution which would hold our foreign assets until we liquidated them by making effective our demands upon the goods and services of other countries. When we exercise the demand by importing goods or services such as shipping and the like, then the asset disappears but until that time it must be held by somebody.
A number of Deputies dealt at some length with the liquidation of external assets during the years 1948, 1949 and 1950. The facts are that while the external assets of the Central Bank in the years 1948, 1949 and 1950 went up by £36,000,000, our combined net external assets decreased by £59.5 million in those three years. I gave the details in the Seanad the other day as to how that occurred. Perhaps, I had better put them on the record here.
In those three years the sterling holdings of the commercial banks decreased by £13.1 million. The sterling holdings of the Central Bank increased by £36,000,000. The sterling assets of Government funds increased by £6.4 million. The sterling assets of private holders went down by £11.5 million.
Our net external assets decreased by the draw on Marshall Aid to the sum of £38,000,000. Counting the decreases in our net external assets during those years, and setting against them the net increases in the various institutions, we arrive at a net decrease in our holdings of external assets during those three years of £59.5 million. In the following year, as Deputies know, there was a further reduction of £62,000,000, so that in four years our net external assets decreased by £122,000,000.
We could, as the Government, in 1951, have taken the easy decision to let that situation run along for another couple of years, to let our net external assets disappear until we would be in the position of a debtor nation. A creditor nation is a nation whose foreign assets exceed its foreign liabilities, and a debtor nation is a nationwhose foreign liabilities exceed its foreign assets. I must say that I would not like to see this country deliberately or inadvertently becoming a net debtor.
I remember in 1939, some months before the last war opened, that the New Zealand Government, with a country that is naturally very rich and with very few people, had a debt falling due in London. As well as I remember, it was only £30,000,000. They sent over their representatives to London to scout around to see if they could get another loan to repay the loan that was falling due, and they were told to go home and balance their books. They would not get it, but, within a month or two, when they were hardly home and when the European crisis was about to break, they were sent for again and told: "Now, you will get it."
I wonder did any Deputy read in a certain British journal last week a lecture that was given to a small country that wanted to float a loan in the British money market. It would be worth any Deputy's while to read the lecture that was given to this small country. It was told that it should pull up its socks and balance its books. It was told how it was keeping out British trade and was not as keen to take foreign investments within its own country as it should be. I certainly do not want to see our people in that situation.
Would the Minister be prepared to mention the name of the country?
I do not want to mention the name of any country here. I can tell the Deputy that what I have said appeared in a British financial paper last week. I do not want to see our country getting into that position. In reply to Deputy D. Costello's suggestion that we should deliberately plan to reduce our external assets by so much per cent. per year, I would say that we should do our utmost to keep as much savings abroad as we conveniently can, that is, unless, by realising those savings, we can createa similarly productive asset at home. Those saving do not belong to this generation; they do not belong to this Government nor did they belong to the last Government. They are the savings of our nation as a whole, and we are the trustees to see that, to the extent those savings are used, they will be used, not for this generation to have a good time but rather to leave the country more secure and more prosperous for future generations.
I have said that there is no technical difficulty in increasing the money supply. If we wanted cheap money for cheap money's sake, or if we wanted to increase the volume of money, there are certain technical steps that are open to us to take. I have pointed out that we could have a fiduciary issue. The technicalities of that are simple enough. If you take one country, when it wants to have a fiduciary issue it passes an Act of Parliament allowing the Central Bank to hold another few hundred million pounds of British securities against its note issue. When the Bill is passed, the Government issues bills to the money market. The money market sells the bills to the commercial banks, and the commercial banks re-discount the bills in the Central Bank of England. That is its particular way of doing it. In other countries, at other times they simply print notes and do not go to the trouble of going those rounds. If we wanted to get money here, equivalent to the British fiduciary issue, we could empower the Central Bank to issue fresh notes up to a certain amount and to accept Irish securities in exchange. If we wanted to use the technique that was used in Britain during the war to increase the money supply through the commercial banks we could follow the procedure which they followed by what was called the Treasury deposit receipt. Now, if we were not too keen on the rate of interest or on the burden that we put on future Governments or generations who would have to repay the debts, we could also increase the volume of money by Government borrowing instead of by taxation. In that fashion we could, by fixing the rate of interest high enough, attract people to save, particularly those who are of the non-spending type, and we couldhand the money over to people, or by Government expenditure get it into the hands of people who are accustomed to spending. In that way the volume of money would very quickly be increased. But it does leave behind it— as the over-borrowing in the years 1948, 1949, 1950 did—the sting of an increase in the dead-weight debt. In those two years the increase in dead-weight debt—the increase in taxation that was necessary for the service of debt—was over £4,000,000.
And what is it for the last two loans?
That is another day's work.
It is not. It is the same.
There are vital reasons why a Government that wants to live up to its responsibilities, that regards itself as a trustee for the people and for the interests of coming generations, does not adopt any one of these methods or a combination of them to create money to avoid the political unpopularity of collecting through taxation the amount of money that they should collect to run Government business. They do that because they want to preserve the value of currency and the external assets or the savings of the nation.
An increase in the volume of money has slightly different effects depending on whether it is increased and distributed in a closed economy or a near-open economy such as this. You have economies which are what I would describe as closed because they are almost self-sufficient, or they have exchange control, and no one can buy abroad unless he signs an application and gets permission to spend abroad. That is a closed economy and in such an economy an increase in the volume of money will operate to increase prices. In a near-open economy such as ours, where we have 75 per cent. of our trade liberalised, no one has to get a permit in order to buy goods from practically any country except a few hard-currency areas. There is freedom of import; there is freedom of exchange, and in such an economy theinevitable effect of an increase in the money supply over and above what is necessary for the people to exchange their own production—the inevitable effect in such an economy is to increase the flow of goods from abroad.
I do not think that a Government, to avoid the political unpopularity of taxation, should procure the creation of credit to the extent that would either increase prices very rapidly or have the effect of running down our foreign assets without creating a similar supply of assets at home.
One of the greatest difficulties in the modern world is that Government and Parliaments now have a powerful influence on the volume of money and the tendency for Governments is to take the easy way out when they want money, not to tax it, but to increase the volume. I have described to the House some of the ways it can be done. An increase in the volume of money to avoid unpopularity of taxation is in itself the worst form of taxation. If there is not sufficient money to enable the country to do its business, it is right and proper that the Government should use its influence or its powers to get an increase in the volume. But if there is already a sufficient volume of money to enable the community to exchange all the goods and services it is capable of producing and willing to produce, then, an increase in the volume of money is poison.
An increase in the volume of money has different effects according to whether a man is depending on a fixed wage, a weekly monetary wage, or deriving his income from property of some kind. When a money supply becomes plentiful in relation to goods, goods tend to go up in price and the value of money comes down. For a Government, therefore, to increase the volume of money in order to avoid taxation is to tax by an equal amount every shilling and every £, every franc and every dollar in the country in which that money is issued. It is taxation by a similar percentage of the £ or the dollar on the small man and the rich man alike. Normal Governments tried to place taxation upon the shoulders of those best fitted to bearit but this type of procedure is to place taxation on all money, on all alike, irrespective of whether they have much or little.
It also has the effect of driving up the value of property of those who have fixed assets. When the boom breaks and the slump comes that means that they have a big increase in their savings in the form of money and they are, from that point of view, in a much better position to carry on than is the poor person. In the old days the volume of money was influnced, indeed controlled, by the ordinary commercial banks working in conjunction with whatever central banking institution existed and, in the beginning at any rate, that institution was merely representative and part and parcel of the general system of the commercial banks. They operated their particular standard, and whether there should be in increase or a decrease in the volume of money depended upon the flow inwards and outwards of gold.
When gold flowed in they expanded credit; more money was distributed amongst the people and the people were able to import and to consume more. At the same time more loans were extended abroad and the countries to whom those loans were made were able to buy more in the market into which the gold had flowed. The result of that was to get rid of the surplus gold or the surplus balance in a short time, the equivalent of the foreign assets to-day. When gold flowed out of the country credit was restricted. The banks called in loans. Sharp unemployment was often caused and the result was that the people were able to consume much less and the deficit in the balance of payments was wiped out by importing less and exporting more.
Most people who have studied the matter admit that the gold standard was a crude instrument. It caused explosive booms through a sudden expansion of credit and they were followed almost inevitably within a few years by disastrous slumps. I do not think we should restore such an instrument in this modern world or use such an instrumentas a gold standard which had such crude effects. Most countries in the western world to-day have their statistical departments and these departments are able to make fair estimates of the trend of the balance of external payments. If they are advised that a big surplus balance of payments is anticipated they should take steps as early as possible in the year to follow an expansionist economy. If, on the other hand, the credit authority is advised early in the year that a disastrous deficit is anticipated, they should take steps to correct that position. That can be done. Nowadays forecasts are much more accurate than they were years ago. Early in 1951 we were advised that we would have a very big deficit in our balance of payments; and, indeed, it so turned out—£60,000,000.
It was £49,000,000 for the latter half of the year.
I am not at the moment dealing with this on a political basis. All through the year 1951 we lost a net £60,000,000 of external assets. That was too much for the country and the Government would have been wrong and neglectful of its responsibilities if it had not faced up to that situation and tried to restore some near-balance in our external payments position.
I am not one of those who worry unduly about a few per cent. either way. I do not think that, good as modern statisticians are, they can forecast the future activities of 3,000,000 people to the extent of a few per cent. either way. They can make a mistake of a few per cent. and it is only reasonable for us not to be worried about an adverse balance, or a surplus balance, of a few millions. I do not agree with Deputy Declan Costello that we should deliberately set ourselves to reduce our external balances, and I do not think we should be worried about a deficit of a few millions in our balance of payments provided we take reasonable precautions to bring it to a near-balance.
Would the Minister agree that it might have been advisable before devaluation to do that?
We got a number ofadvices about devaluation. I will quote one advice that we got from Deputy MacBride. On 30th January, 1952, he assured us in the Dáil—the Deputy can look it up at Volume 129, column 160 —that we were on the eve of another devaluation, and his general thesis was that we should try to realise our external assets at that time, buy something with them before the £ was devalued again. That is nearly two years ago, and what has happened since? I do not know whether Deputy Rooney gave similar advice at that time or not. Supposing we had taken that advice and that we had invested in any of the commodities that were for sale at that time, say, wool, tin, rubber, sisal, or some of these things, what would have happened? We would have realised our sterling assets. For every £100 we put into merino wool at that time we would now get £47 or, if it were cross-bred wool, we would get £44. If we had chosen to put our money into rubber, lest the £ might be devalued, each £100 worth of rubber we bought, we could now sell for £26. The £100 invested in tin at that time, when Deputy MacBride forecast another devaluation, would now be worth £42. If it were sisal we invested in, the £100 would be worth £39; if it were jute, £42; zinc, £36, and so on.
In fact, since Deputy MacBride made that prognostication and prophecy, there has been a revaluation upwards. The £ is worth more in terms of goods to the extent I have described. We cannot enter into these prophecies. An individual, on his own guess of what the future trends of markets may be or what is going to happen in the world, with his own few hundred pounds can have a shot at buying £100 worth of tin in the hope that it will go up to £200. If it falls to £42 he is just so much the poorer. Trustees are never allowed to act in that way. Trustees, whether in private life or in public life, are supposed to act on the safe side. One of the reasons why, for instance, the Central Bank has its holdings in London in the form of short-dated securities rather than long is that it cannot take the risk. Indeed, it is forbidden by law to hold more than a certain proportion of its securitieswith a maturity of more than 12 months. Supposing the Central Bank, a few years ago, had gone in for long-term securities, supposing it had invested all its money in old consols— a few years ago they were up to £100; they now stand at about £60—they would have dropped £40 in every £100. Instead, they invested the money in short-term or early maturing securities and they could afford, if they put in £100, to hold on until the British Government would pay them the full £100. Therefore, there was no loss. That is one of the reasons why the Central Bank is on the conservative side in these matters, conservative from the point of view of the ordinary individual who might prefer to get a higher rate of interest on this money even through it was coupled with a risk.
The commercial banks also hold a very large portion of their reserves in Britain in the short-term form and they have a somewhat similar reason. I have often thought that the commercial banks hold too much in short-dated security, low interest-yielding security, but they are in a most peculiar position from the point of view of commercial banks because they almost have to act like a Central Bank, in almost the same conservative way. If all the external assets were held by some institution, as they are held in England and elsewhere, the commercial banks would have all their assets within the country and they could rely upon our own Government here. In the case of the Irish banks, they could rely on the State coming to their rescue if there was a run on the banks or a slump of some kind that would cause confusion.
Supposing we take the situation of our commercial banks as holding quite a lot of our national reserves abroad, if they had elected to invest in old consols or long-term British Government securities, at the cost of £100 and that these suddenly dropped, and there was some sudden call upon their resources here and when they went to realise their securities abroad they could only get £60 or £70, they would be short of a lot of £30's when their depositors would call for the money.
That is the reason, I think, why theyare so conservative. Of course, we have in our Central Bank Act a means by which the Central Bank as a lender of last resort could come to their rescue. Some institution has to be the lender of last resort if people suddenly start to behave in a way very different from the way they have always behaved in regard to their deposits. Here, the Central Bank is that lender of last resort and it could encash Irish Government securities if it decided to do so unanimously and if it got the permission of the Minister for Finance.
One of the things that is not realistic and, in fact, does a lot of harm in the discussion of financial affairs is when the allegation is made that the action of our institutions, or our credit policy, is dictated by the British Government or by the British Central Bank or by the City of London. That is quite unrealistic, and if we have a dear money rate here or a cheap money rate we have nobody but ourselves to blame for it. It may be wise to have money dear here when it is dear in Britain, or it may be wise to have money cheap here when it is cheap in Britain, but whether it is dear or cheap the British have no control over it.
We could have money here at 1 per cent. or no per cent. interest and the British Government borrowing at 5 per cent., or we could have the reverse; but let us face the fact that if we decide to have money at 1 per cent. interest we can have it no matter whether the British Government rate of interest is 1, 2, 3 or 10 per cent. If we have dear money or cheap money you have to blame the combination of Irish institutions that influence it, from the Government to the Central Bank and to the ordinary commercial banks.
It is wrong to say that the Central Bank have no powers over the commercial banks. They have if they want to exercise them and think that the commercial banks are behaving unreasonably, having regard to the general interests of the community. The Minister for Finance, too, has a very big influence, because the Ministerfor Finance has the right to bring the Central Bank to consult and advise with him about their general credit policy, and if the Central Bank decided that the commercial banks were behaving unreasonably they could, under Section 50 of the Act of 1942, use very drastic powers of enforcing discipline upon the commercial banks. In Australia, the Central Bank forces the commercial banks to lodge any deposits above a certain amount and they pay them a low rate of interest, but they do pay them ? or something like that at the present time. And under Section 50, the Central Bank, if it so decided, could force the commercial banks to put in any amount of deposits at no rate of interest. So, therefore, do not let us get into this foolish way of blaming the British or blaming anybody else except ourselves if it is wrong, if we have been acting in a wrong financial manner.
I want to say that I do not believe that this Government has been very wrong in its handling of financial affairs over the years. It is all very well to talk now about the revolutionary ideas that should have been put into effect by the Fianna Fáil Government in the 'thirties. Politicians have to be judged by their circumstances. Where you are condemning Fianna Fáil for not being as revolutionary or progressive in financial affairs 20 years ago, you have to think that because of a lack of money the Americans were not able to distribute the goods their people were able to make and that 12,000,000 of them were idle for years.
You have to think also that in neighbouring Britain almost £4,000,000 are idle. I think that any reasonable financial historian judging Fianna Fáil by its surrounding circumstances would say that we were extremely progressive for our day in that we were the first Government that took on a number of social measures and that we decided that even though money was short we were going to build houses at the greatest possible rate, and we did it. I do not want to go into any political aspect of this matter, but let me say this, that after the war wedecided that we were not going to allow any activity for the production of an increase in the standard of life and resources of our people to go short of money.
Again, we have to be judged by our circumstances. We had a Government in England which was inflating at the rate of £1,000,000,000 a year, and in those circumstances I was acting-Minister for Finance. I had a very long series of conferences with the Central Bank and with the commercial banks, and after that series of conferences we got money at 1 ? per cent. If Deputies say to me: "Why are you paying 5 per cent. now?" I want to say that the rate of interest given to the public for investment in Government loans is not a matter of necessity but a matter of policy. If it is right that the people should be saving more, if there is necessity for them to save more in order to get payments in reasonable balance, then it is right that the Government should give them an inducement to save by having a reasonably high rate of interest. If there is in fact a surplus of goods and a shortage of purchasing power, if we have a surplus in our balance of payments, it is right that the rate of interest should be low so as to discourage saving and to promote expenditure.
If we are to get money short term from the banks it should be got at a reasonable rate having regard to the circumstances of our banks. Our commercial banks have two functions. One of their functions is to be a safe depository for the savings of the people and a checking institution by means of which the people can do their business in the form of cheque. Those are two very useful things to do, and if we had not the commercial banks there to do that work we would have to substitute it in the modern days by increasing the Post Office Savings Bank and instituting in the Post Office Savings Bank a system of cheques so that people could clear their accounts by the use of cheques rather than of cash.
They have both systems in Belgium—a State bank runs side by side with the commercial banks.
The commercial banks here, as in other countries, have another function, and that is that they are one of the instruments that the State has. that the people have, for the expansion or contraction of the volume of money, and that is a very important function which no Government in the modern world would allow to go uninfluenced by the consideration of the general interests of the people. I dealt with the gold standard days when the banks took the wrong decisions. In modern times there is no Government which would allow the banks at their own sweet will to operate an expansion of credit when that was wrong from the point of view of the general interest, or a decrease of credit when it was not in the general interest. But it is important from the point of view of the people that it should not be merely at the dictation of the Government of the day. That is why in this country and in other countries we have set up a Central Bank which, though from time to time we may think it rather conservative, is at least the people's shield against the Government creating or having created on its behalf a superabundance, a poisonous supply of money.
It is, therefore, of the utmost importance that the independence of the Central Bank should be maintained. That is not by any means to say that the pronouncements or reports of the Central Bank should automatically become the law of the land. We have in our Central Bank half a dozen men, as Deputy Lehane has pointed out, who have been appointed and reappointed by both Governments, but even though they have, their word should not automatically become law. We have the right and, indeed, the duty to examine any proposition they put forward and, if we feel they are wrong, to point out where they are wrong and the extent to which we think they are wrong. However, they are the safeguard of the people and it is right that their reports should be carefully considered just as it is right that they should weigh their reports very carefully before issuing them.
We all know that the Government of the day is held responsible for theoperation and the working of the Central Bank and that its report is very often attacked by people who want to create trouble for the Government of the day. It was from that point of view that in the O.E.E.C. I made the suggestion, which was adopted, that, in order to help each other along, we should set up a group of independent experts who would, without being influenced by the Governments of the countries concerned, give their opinion on the general financial trend within the countries. I said there and I say now that when a Central Bank issues a report it becomes a very acute political matter and if it counsels caution that is very much attacked by certain sections of the community. I said that, if you had a group of experts who would report upon the various countries without any individual country being able to stop the report, it would at least call attention and give support to the groups within the country which, whether they were in opposition or in Government, stood for a reasonable financial policy.
For the last couple of years the O.E.E.C. experts have been independent. Before that they were not independent and the hand that wrote the reports was the hand of the Government of the country. Naturally, each individual Government was anxious to have a report that would not embarrass them politically. In regard to the setting up of the experts I also suggested that even though these experts made a report it should not necessarily become the law of the land to which it applied, but that if it counselled hardness in the financial policy at least it could not be said that either the Government or the Opposition had influenced the report; whereas if the domestic Central Bank gave such advice it would be accused of favouring one or other of the Parties or sides in the State.
The first report of O.E.E.C. experts made—I have not looked at them recently—after their freedom to criticise, was to the effect that in certain countries there was a superabundance of money and that it was the duty ofthe Government to cut it down. It was the first time they had ever been allowed to say it and it was necessary it should be said in relation to certain countries. This last report they are preparing is to the effect that an expansionist rather than a hard financial policy is called for by the present situation, the restoration of reasonable balances of payments, and so on. It is necessary if we want to fulfil our job as trustees of the national savings that we should balance our total national Budget or account. We should see that we are paying our way, that we are exporting or paying in other ways for all our imports. If we do not reasonably balance our general national budget in that way, we are running into a deficit and we are imposing an unnecessary burden on the future.
It is open to Governments to correct a deficit in the balance of payments by a combination of budgetary, financial and general credit steps, by its influence over the credit situation. If we have a surplus in our balance of payments, it is the duty of the Government, also through a combination of budgetary steps and its influence over the volume of credit, to make certain that the volume of money is expanded and the people allowed to live at a standard they can reasonably afford. But it is bad social policy as well as bad economics to encourage the people to live beyond their means for a time at the expense of their own future prosperity and at the expense of the prosperity of their children. The aim of the Government should be to provide sufficient money within the country to enable the people to exchange the total goods and services that they are capable and willing to produce, but no more.
Before the Minister leaves that point, would he say if he is in favour of repatriation of past savings?
I dealt with that before the Deputy came in, and I want to go on to other points now. I dealt ex-haustively with that and with the Deputy's statements in the matter.
It was said here to-day—and I agreewith it; no one could agree more with it—that what is more important than the volume of money or the volume of credit is the direction in which it is spent. A farmer who has a sum of money in the bank and who wants to employ some of that capital may decide to apply £40 of it to the draining of one acre that will not give him a return for 100 years. That is not going to have any immediate effect on increasing his income. If he followed the advice of the experts, the soil scientists down at Johnstown, and got his soil tested and applied that £40 instead to liming and fertilising, he might get the same results as they got in Johnstown —where through an expenditure of £2 on limestone, and all other conditions being equal, they got an extra yield of £100 from 1947 to 1952. If that farmer wants to increase the standard of life of his children or if he wants to make some money to build himself a new house, it is important for him to spend the £40 not on one acre but on 20 acres. If he spends it on the 20, and gets the same result as they got in Johnstown, he would have £2,000 for himself.
Supposing he had, not 20 acres?
The direction in which the volume of money is used is as important as the volume itself. Deputy Rooney puts me up against the proposition that the man might not have 20 acres. We have here in this part of the country 15,000,000 acres. We were promised that 4,500,000 acres would be drained at £10 an acre. It turned out to be £40. We have that option within the total area of the country; and where the Government has an influence on the direction of credit, it would be much more important that we spend £40 in inducing the farmers, where the soil is acid, to put £2 worth of lime on to the soil per acre, so that they may get an extra £2,000 in a couple of years, rather than spend that £40 on a piece of land that would not give the £2,000 in 2,000 years. I agree, therefore, that the direction of credit is important.
One of the things I would like to seeour credit being used for is to duplicate the results that are being obtained in Johnstown and on many farms throughout the country where, by an application of the farmer's own savings, the credit he can get from the bank, the credit he can get from the merchants or the credit he can get from the Agricultural Credit Corporation, the money he has is applied to producing an immediate improvement on his farm rather than being spent in some way that would give a small increase, perhaps, over a long period of time.
We are up against this situation here that we have an expenditure of £100,000,000 or so on our ordinary national accounts. There is no one here outside the Dáil who would think that this political Party or any other political Party could run the country for less than £100,000,000. Not even Deputy Lehane would advocate that we would make the cuts that would be necessary.
Is it not £135,000,000?
For the ordinary housekeeping expenses of Government it is £100,000,000. I am giving it more by way of an illustration than as an accurate figure—it is £100,000,000 plus. No one would say we could get that burden down, yet it is a heavy burden on our people. If we wish to maintain that level of expenditure, we must use whatever money we have in ways which will be productive as quickly as possible.
Another example of the proper use of credit is in the provision of electricity, the spending of it to give our people employment and to provide cheap electricity at the same time. The proper way to do that is to put it into our turf bogs or hydro-electric schemes. Deputy McGilligan spoke the other day with some contempt about turf. The one place in Europe that the Americans found was producing electricity more cheaply from solid fuel than themselves was Ireland and it was from turf it was being produced.
The coal was dearer: the turf was cheaper. The coal at the Pigeon House, according to the E.S.B. in their last report, costs 952 pence per unit. whereas down in Allenwood they canproduce a unit of electricity from .834 pence worth of turf, and at Portarlington from .757 pence worth. That is quite a considerable saving and I think Deputy McGilligan should have been more accurate than to make the statements he made regarding that affair.
Only one or two persons dissented from the proposition I made that the holding of external assets by the Central Bank is no handicap to our increasing national credit or the volume of money here and that it has no effect in making money here dearer. I hope we shall not hear that particular canard again and that we will realise that the world is round and that we should act as if it is round. If the scientists had acted for the past 500 years on the old belief that the world was flat, they would not have got very far. If Irish public men act and talk as if the British had control of our financial affairs here and as if the holding of external assets was any handicap to us, then they are either completely ignorant of or oblivious to the financial facts of life.
Are we being told now by the Minister that the British have no control over our financial machine?
They have not.
Of course, they have.
Deputy Hickey was not present in the House when I was speaking earlier. We want to use our total monetary resources, wherever they are, to develop our agriculture and industry and to improve our standard of life. Our resources are improving as the years go by. They are very much greater than they were 20 years ago. Our land is improved and our industrial technique and management skill have greatly improved. The savings we have at home and abroad are reasonable, having regard to our requirements. What we want to do, in my opinion, is to save wisely and to spend wisely for the purpose of increasing those resources still further, in order to give a reasonable standard of life to the people ofthis generation and a secure and a better standard of life for our children and children's children.
