Vol. 221 No. 1
I move:
That in section 3 (4) of the Finance Act, 1956 (No. 22 of 1956), and with effect as from the date which is the transfer date within the meaning of the Act giving effect to this Resolution, the reference to the National Bank Limited shall be deleted and a reference to the National Bank of Ireland substituted therefor.
The necessity for the Financial Resolution is that in the recent Finance Act there was a tax exemption on bank deposits bearing interest of up to £50.
Interest?
Bearing interest. Some of the deposits in the National Bank—deposits in branches in England and Wales—will no longer qualify for the exemption from tax on the first £50 of interest, if and when the amalgamation of the National Bank and the Bank of Ireland is effected. Therefore, there will be a loss to the depositors concerned. That is the reason for the Financial Resolution.
This is hardly the occasion to discuss this in general but I think the Minister should consider whether the change in the law has had the desired result or whether, in fact, the change which required deposits bearing interest in excess of £50 or over, was not using a sledgehammer to crack a nut and whether, in fact, it has not had an effect on the movement of capital. This is a matter on which it is not possible to get definite figures but there is an impression that, because of that decision, a number of people who had deposits in the bank, many of them of long standing, moved these deposits because of the change effected by the 1963 Act, I think. Certainly, the general tendency of much recent legislation, of that particular requirement as well as certain requirements of the Finance Act of last year has been to militate against attracting capital to this country. The effect in some cases was possibly to bring about a movement of capital elsewhere. As I say, this is hardly the occasion to discuss the matter in general because it is only incidental to the Bill that the Resolution is necessary, but I would suggest to the Minister that the matter should receive serious consideration in relation to any necessary alteration in the coming Finance Bill.
Am I to take it that the introduction of the Financial Resolution means that it will be necessary to provide State funds somewhere or other to deal with this transfer which, according to what the Minister said, when introducing this Bill, is supposed to be in the best interests of the National Bank, the overseas section and the branches here? Am I also right in assuming that the Chairman of the National Bank Mr. W. Anthony Action in his statement said there was a necessity for this provision because there was too great a call on the capital in the National Bank in Ireland—for the so-called economic expansion that is taking place at present—does that not rather suggest that the National Bank, which down through the years, well over a century, was able to supply the necessary capital, has lost a good deal of capital as a result of the misguided Finance Act passed last year? This Finance Act caused a flight of capital from the country. In effect, the real reason for the division of the National Bank, the UK portion to the Commercial Bank of Scotland and the Irish portion as a subsidiary of the Bank of Ireland, is that there has been a flight of capital from this country, due to the direct policy of the Government. That, in fact, is the meaning of the Financial Resolution.
I want to say a word about the National Bank Transfer Bill. It is very obvious that we are now passing the appropriate Resolution to authorise the Minister to bear the expenses arising out of it. I want to say, quite deliberately, that I do not know what is going on.
Nor does anybody else.
I think Dáil Éireann are in a very embarrassing position in being asked to legislate in the present situation without the information which we ought to have. I want to make this quite clear. I consent to the passage of this Resolution, solely and entirely on the basis that I know the directors of the National Bank, Paddy Duggan, John Leydon, James Davy, Anthony Quirke and E.A. Maguire. I do not know many of the directors of the Bank of Ireland. I do not know Mr. Carroll but I know all belonging to him. I know Professor Meenan and so far as I know, and so far as my judgement is concerned, those men stand trustees for their respective shareholders. My knowledge of them leads me to believe that in their capacity as trustees, they would not do anything which was not consistent with what they believed to be, after the best inquiry they could make, in the best interests of the shareholders. I want to make it perfectly clear that is all the information I have got.
Mind you, I have studied carefully the Minister's statement in respect of this Bill and I cannot get any further enlightenment from that statement either. It is extremely odd that we should find ourselves in the position of giving approval in anticipation of a decision which the shareholders themselves have not taken. I fully appreciate that this is an enabling Bill, a Bill to enable the Minister for Finance, by order, to make those legislative deposits in the event of the shareholders of the three participating companies approving this arrangement.
We can say what we like. The fact that we are passing this Bill appears to suggest generally that we approve the transaction. I want to make it perfectly clear that so far as I am concerned, I know nothing whatever of the merits of this transaction. I proceed solely and exclusively on the basis that I trust the integrity of the individual directors, to whom I have referred and, so far as I am aware, Dáil Éireann has received no information from anyone which would justify it in passing a decision on the merits of the proposals which this Bill is designed to facilitate. I do not think that is a proper procedure. When we come to consider it on Committee Stage, we ought to have definite regard to sections 3, 4 and 5 because I know of no precedent of legislation of that character in my experience. I urge the Minister for Finance to give us some precedents for the procedures envisaged in those sections, some evidence that the Legislature has ever undertaken in the past to do the things it is proposed to do in those sections.
May I say, in replying to Deputy Cosgrave in the first instance, that when the provision in the Finance Act of 1963 was introduced, I, like him, heard some comments from bank managers throughout the country that the obligation on banks to disclose deposits bearing £25 interest per annum and upwards would cause a flight of deposits and, therefore, of capital from the country. Being the then Minister for Industry and Commerce and being apprehensive to some degree of that suggestion, I raised it with the Minister for Finance of the day, Dr. Ryan, and he assured me that there was little, if any, flight of capital as a result of that provision. Nevertheless, I acknowledge that there may be something in that contention and, in the last Finance Act I raised the £25 to £50 as being the interest earned by deposits which would have to be disclosed by banks. I have continued to make inquiries about it and I am assured that there has not, in fact, been any significant disappearance of deposits or capital reserves in this country as a result of the 1963 Finance Act, or the 1965 Finance Act. But, of course, in the 1956 Finance Act, there was already a provision whereby deposits earning £15 interest per annum or more would have to be subject to income tax, so the 1963 provision was not entirely a new one.
However, the point I want to answer specifically is that, notwithstanding my inquiries—and, I will admit, my apprehensions—at the time, I am convinced, as a result of the advice I have been given, that this has not in any significant way diminished the availability of capital in this country.
As Deputy Dillon rightly pointed out, this is an enabling Bill. Its origin lies in the background that, by reason of the economic advance of this country, there appeared to be an interest in outside banking interests taking over existing Irish banking interests. The Bank of Ireland, as the Deputy is aware, acquired the interests of the Hibernian Bank and the National City Bank some years ago but there was still a continuing interest in the banking interests of this country by outside banking interests. The Central Bank and, indeed, the Government openly expressed concern about this trend and expressed it in the positive way that it was desirable that the banking business of the country should be held, in so for as was possible, by Irish interests. I think it was consistent with that policy that the Bank of Ireland sought to acquire the interest of the National Bank. Deputy Dillon was, unfortunately, absent, even if he has acknowledged reading my introductory speech on the Second Reading last week, but I mentioned on that occasion that the National Bank, as far as their holdings were concerned, were properly assessed as to the current value of the buildings, the bank premises, throughout the country and as to the current value of its business generally by an independent firm of accountants whose reputation, I believe, is international.
The Bank of Ireland and the National Bank of Scotland are the two other interests involved—the Bank of Ireland decided to acquire the interests of the National Bank in Ireland and the National Bank of Scotland the interests of the National Bank in England and Wales, which had an independent finance house advising it. The question was raised why the National Bank itself did not have such independent finance house advice. I think that question was answered in the press today by the Governor of the Bank of Ireland.
The Minister himself said because they had four merchant bankers on their own board.
As the Deputy knows—and I am sure he does— there is a danger that smaller Irish banking interests might be absorbed by bigger interests from outside. It was for that reason the Government welcomed and acquiesced in this arrangement whereby the Bank of Ireland would acquire the interests in Ireland of the National Bank. Under this arrangement, the National Bank of Scotland would acquire the interests of the National Bank in England and Wales, in so far as it has branches there.
I also said last week that while the National Bank was established in the early nineteenth century—in 1835—by Daniel O'Connell, ultimately, in order to acquire clearing-house facilities in London, which were essential to the efficient and more profitable operation of the bank, the legal hub, in other words, to comply with the Companies Acts, was in London. It is for that reason it is necessary now that we should, in our legislation, make provision for the acquisition by the Bank of Ireland here in Ireland of the interests of the National Bank, and by the National Bank of Scotland in the United Kingdom, even though we cannot make that provision in respect of the interests of the National Bank in the United Kingdom.
As I said at the outset, it is an enabling provision. It is necessary that this legislation be passed before the end of March of this year because, otherwise, the tax law in relation to these matters may have changed in Britain and, under the existing company law of Britain, it will require 75 per cent, or a majority, of the existing shareholders of the National Bank to effect this acquisition by the Bank of Ireland and the National Bank of Scotland. I mentioned last week that there was a document—I produced it to the House then but unfortunately have not got it now—indicating the value in a period of ten years of the shares of the National Bank as quoted on the Stock Exchange. The document gave full details of the assets of both the National Bank and the Bank of Ireland. Therefore, I feel that to the extent to which this House needs information in order to enable legislation to be passed, such information is sufficiently available to us.
May I inquire has the document to which the Minister now refers been laid on the Table of the House—is it available in the Library?
I do not think that is the case. It has been distributed to shareholders.
Surely it should be available to Members of the House?
Is that the document?
It is.
There is absolutely no information in it.
It has been acknowledged by Deputy Dillon that this is enabling legislation. It is a desirable trend as far as our economy is concerned in that Irish banking interests are controlled by the banking arrangements of this country. I hope it will become even more so. I feel that if, having passed this legislation, the shareholders of the National Bank will agree to the transfer of their shares, or the purchase of their shares by the two companies concerned—the Bank of Ireland and the National Bank of Scotland—it will be in the best interests of the Irish economy.
