I am raising this matter on the adjournment because at Question Time today I posed a supplementary question to the Minister arising out of Question No. 47 put down by Deputy E. Collins. My supplementary question to the Minister was as to whether he was aware that, during the past year or so, the margin between the Central Bank rediscount rate and the overdraft rate had widened by something like two percentage points. The Minister had—and I use the word advisedly—the effrontery to deny this and say that nothing of the kind had happened over the period of the past year. He went on later on to add that nothing of the kind had happened over a more recent period.
I found it difficult to believe my ears but I felt that, as on these occasions one should always check as to whether one had made any mistake in examining the figures, as I had done carefully yesterday, I should check them again. I checked again in the Library and found that I was, of course, perfectly correct. The Minister's statement was completely misleading and incorrect. Accordingly, I raise the matter on the adjournment because I think that, when a Minister chances his arm, as the Minister had showed sign of doing, and produces false information to the House on a matter of this kind, he should be pulled up and pulled in here to answer for his misdemeanour.
The position on this matter is as follows. I go back for a period of just under two years to show how this has developed. In August, 1968—or in the autumn of 1968 to be more precise— the bank interest rates were reduced and the ordinary overdraft rate became 8 per cent. From there on, in the months that followed, for the next six months, the Central Bank rediscount rate remained over 7 per cent throughout that period. The margin between these two was under 1 per cent, and, indeed, down to 1/2 per cent at certain times. In March, 1969, the overdraft rates and bank interest rates generally were increased and the ordinary overdraft rate was raised to 9 per cent but the Central Bank rate at the same time went up to 8 per cent or over. From then on the margin still remained under 1 per cent, and again, as low as 1/2 per cent on occasions.
In September, 1969, however, the bank interest rates were raised and the ordinary overdraft rate went up to 9½ per cent. The Central Bank rate did not rise. It remained at just over 8 per cent until April of this year when it dropped to 7¼ per cent. At that point the margin between these two rates had widened to 2 5/16ths and it has since then remained at a margin of over two percentage points. Thus, in April of this year, the margin between these two rates was 2 5/16ths as against ?ths a year earlier, an increase of almost two percentage points.
The latest figures we have show that in June of this year the margin was 2?th per cent as against ½ per cent a year earlier. So, the point I made that this margin had widened by almost two percentage points during this period is correct. The figures are there. The Minister must, indeed, in the meantime have had a chance to look them up and found that he did mislead the House. I hope he will apologise for having done so.
I should like to make the point that the margin between these two rates is extremely high. The margin last April of 2 5/16ths was the highest that I can trace at any time in the past six years. Moreover—and this is closely related to that—the margin between the ordinary deposit rate that the banks have to pay, which must bear some relationship to the Central Bank rediscount rate, is now 5 per cent and has been 5 per cent since last September.
Since Question Time this afternoon I have gone back over these figures. I find that at no time in the past 18 years—my records do not go back further than that—has this margin ever reached 5 per cent. This is the margin out of which the banks make their profits. They make their profits between the turn on the deposit rate—what they pay to depositors—and the overdraft rate they charge to customers. Of course there are several deposit rates. Of course there are a number of overdraft rates. The figures I give are for the ordinary overdraft rate as published and, in respect of deposits, they are for the ordinary deposit rate for deposits of under £25,000.
For the first time in 18 years—perhaps, indeed for much longer—the profit margin of the banks is as high as 5 per cent. It is higher than ever before. This I think is a matter of some importance. I asked the Minister today to confirm that what I said was true, or I asked him was he aware that what I said was true and to go on to make a statement on the matter, because it requires a statement. We need to be told why it is that the banks' profit margin has been permitted by the Government to rise to this level which has no precedent and why it is that in the period of six months—longer than six months; nine months since last autumn—we have been in a situation where the bank overdraft rate was raised last autumn to 9½ per cent from 9 per cent and, since then, the Central Bank rediscount date has fallen, and fallen quite substantially, but the bank overdraft rate has not been reduced.
It was increased at a time when the Central Bank rediscount rate was falling because that rate was 8½ in June of last year, 8-7/16ths in July and 8¼ per cent in August. In the face of that decline in the overall interest rate pattern, reflected in the Central Bank rediscount rate, the banks arbitrarily raised their overdraft rate by 1/2 percentage point, doing so without any similar increase in the deposit rate. They did not raise their deposit rate because they did not have to, because, in fact, interest rates were falling. Therefore, they were able to get money without having to raise their deposit rate. They raised their overdraft rate and increased their profit margin by ½ percentage point.
Since then there has been a continued decline in the Central Bank rediscount rate reflected in the decline in interest rates generally but there has been no change in the interest rates charged by the banks. We are in the position, therefore, that in a period when interest rates were falling, the banks raised their overdraft rate, increased their profit margin and, indeed, their profit margin is now, as between the ordinary overdraft rate and the ordinary deposit rates for deposits of under £25,000, at a record level. Since then, in a period of ten months almost—nine or ten months— we have had a continuing decline in interest rates reflected in the Central Bank rediscount rate, and nothing has been done about overdraft rates.
So, the people who have borrowed money from the banks, many of whom could have repaid this money if the banks had not locked their staffs out and closed their doors, are in the position of paying a record interest rate, at a record profit margin to the banks, in a period of declining interest rates, with no change in their overdraft rates by the banks to reflect this position and, moreover, if they are in a position to reduce their overdraft they cannot do so. We have had no guarantee from the Minister in this House—or even any indication of interest in the subject —that he will ensure that the banks make arrangements to ensure that people are not charged interest on overdrafts they would not have had, had they been able to return the money to the banks.
This is a serious situation. It is not one to be dealt with by trying to mislead the House either intentionally or, knowing the Minister, I would have thought unintentionally, by producing information without checking it. If the Minister is asked a question to which he does not know the answer the appropriate reaction is to say: "That is a separate question" and try to get away with it like that or, if you are more honest, to say: "I ought to have that information but I have not. Would the Deputy please put the question down again?" Admittedly that reply today would have been a little ironical in view of the imminent closure of the House. Certainly there is no excuse for a Minister producing misleading information of this kind.
I would have thought that when I put this question to the Minister, if he had not the information, he would have given me the benefit of the doubt. I would have thought he knew me well enough to know that, on the whole, it was more probable than not that if I produced a figure of that kind I would have looked it up and not invented it out of thin air. I would have thought the Minister would have needed strong grounds for denying my statement and that, unless he had strong grounds, he would either have accepted it or said he was unsure of the position, instead of which he took it on himself to contradict me and falsely say to the House that no such increase had occurred in the margin between the Central Bank rediscount rate and the overdraft rate over the period of the last year when, in fact, it has occurred in that period as I have shown. I think the Minister should apologise for misleading the House in this way today.
I think he should then proceed to answer the supplementary questions. Will he make a statement on this development, on this record level of overdraft rates, the record level of the margin between the ordinary overdraft rate and the ordinary deposit rate, on the trend there has been over this period of the past year for bank overdraft rates to rise without any con-comitant increase in the deposit rates at a time when there is a pretty steady decline in interest rates as reflected in the Central Bank figures? I would also ask the Minister to tell us—because it arises directly out of all I have said —what is happening about the proposed reference of bank rates to the Fair Trade Commission.
About 15 months ago in the Third Programme we were told—this is my recollection—that the terms of reference of the Fair Trade Commission were to be widened to enable it to look at this matter. There was, and had been, considerable pressure at that time, and on my part considerable pressure for several years, that x interest rates should be examined and that the cartel arrangement under which they are fixed should be examined. We were told then that this would be done by the Fair Trade Commission. With the customary lack of any sense of urgency this matter appears to have been left since then. I should like the Minister to tell us if there is any progress on it and when we shall have this examination and when will its results appear. I have been raising this matter since 1966, I think, in the Seanad, and it seems now that well over five years will elapse between the time I first raised it and when we are likely to get any result. Knowing the pace at which the Fair Trade Commission have traditionally worked, even if their powers were extended and they began to examine this matter, we could not expect to get a result from that study for a very long time. I also ask the Minister when shall we have the Central Bank Bill——
