asked the Minister for Finance if he will make a statement on the results of the recent National Loan and on his proposals for the financing of the public capital programme.
Ceisteanna—Questions. Oral Answers. - National Loan.
10.
The recent 11 per cent National Loan, 1993-1998, which realised £23 million, including £16¼ million in public subscriptions, was considering all the circumstances quite satisfactory.
My proposals for financing the public capital programme were set out in the capital budget booklet. These proposals are constantly being reviewed in the light of developments during the year. In view of the present unsettled state of capital markets both here and abroad it would be premature to make any statement on the matter.
Will Deputy Burke please resume his seat? Deputy Ryan on Question No. 10 please.
I have replied already to No. 10.
The Deputy has given his reply.
He cannot get away with that one.
As the leader of the Opposition cannot keep his followers under control——
I am not surprised. The Minister hoped to get away with it.
(Interruptions.)
The following is the answer which the behaviour of the Opposition made it impossible for them to hear:
The recent 11 per cent National Loan, 1993-1998, which realised £23 million, including £16.25 million in public subscripitions, was considering all the circumstances quite satisfactory.
My proposals for financing the public capital programme were set out in the capital budget booklet. These proposals are constantly being reviewed in the light of developments during the year. In view of the present unsettled state of capital markets both here and abroad it would be premature to make any statement on the matter.
Arising from the Minister's reply, could I ask him whether in the light of the results of the recent National Loan he proposes to make any changes in the proposals he published for financing the public capital programme?
As I indicated in my reply, it would be premature at this stage to anticipate what the final outcome in relation to the financing of the public capital programme this year would be. As the Deputy is no doubt aware, there have been certain developments in the capital market, both here and abroad, as a consequence of which people preferred for some time past to go for liquidity and short-term funds rather than invest in gilt-edge securities, which are long-term funds. The present indications are that a change is coming in this situation. As the market is developing in recent times the likelihood is that there will be a considerable injection in such securities.
The Minister still expects that he will have available the sum of £55 million on the sale of securities, including the recent National Loan?
We hope we will be able to meet the necessary requirements for the public capital programme.
In view of what the Minister has said in reply to the first supplementary question about the uncertainty of the international capital market, does he now agree that he was very unwise to have gone for a National Loan when he did? He and his advisers read the situation wrongly to the extent that they had to "recap" and withdraw the terms and introduce new terms the day after they introduced the loan.
That would be quite an irresponsible interpretation of the situation. As I pointed out on a recent public occasion, when the nine Finance Ministers of the EEC met on the previous Friday the view was that interest rates had reached their peak. There was no dissenting voice at that meeting. The following Tuesday, when London was faced with embarrassing trade figures, emergency measures were taken. The need for those measures was not anticipated by anybody. In the circumstances, we took the correct decisions to float the loan when we did. We took immediate remedial action once this extraordinary development, which shocked the world occurred. As a result of this corrective action, we had a very satisfactory outcome.
None of the other eight members of the EEC sought a public issue at that stage. It would have been incumbent on the Minister for Finance of the Irish Republic to read the situation better than he did. Will the Minister now agree with the financial business writer of The Irish Times that the loan was a flop?
No, I do not agree it was a flop. In the circumstances which occurred this year, which were quite exceptional, the correct corrective action was taken, as a result of which a very substantial intake occurred. The fact that the insurance companies, which are concerned with long-term investments, invested so generously in the loan is a sign of confidence.
The Fianna Fáil Party cannot escape from the general trends in international money markets at the moment. It would be totally illusory for us to believe that we could protect ourselves from movements taking place across the world. The outcome was very satisfactory and to suggest otherwise is to be unpatriotic.
Apparently international implications apply only when Fianna Fáil are in Opposition and not when they are in Government. It is a fact that there was a tremendous shortfall in the amount subscribed by the public compared with what the Government anticipated? The amount contributed was only about 50 per cent of what was contributed to the last National Loan in 1972. When there is a shortfall is it not incumbent on the Minister to "recap" on his capital programme and to indicate to the House and to the country how he will make up the difference which has been occasioned by this tremendous shortfall?
As Deputy Lynch will recall as he was Minister for Finance at one time, when national loans are issued certain arrangements have to be made about a month beforehand because of the necessity to arrange printing and the preparation of the prospectus.
They were all successful issues.
All of this was done in the light of the economic situation. Were it not for the peculiar and unexpected action on the part of the British Exchequer this loan would have been on precisely the same pattern as previous loans. In the circumstances which occurred and over which we had no control, as Deputy J. Lynch knows, there was a very satisfactory outcome.
May I ask the Minister, in the light of any shortfall which has arisen as a result of factors which he has outlined, whether it is his intention to seek money abroad and, if so, can we expect that the interest rates will be even lower than those for the loan at 8½ per cent recently?
The Government are naturally considering several alternative sources of capital. The availability of funds from abroad will be one of the sources which the Government will consider.
Could we anticipate that the interest rates to be paid for such loans drawn from outside, from whatever source may be, will be much less than what we are paying at the moment——
As the Deputy is aware, there is always a significant difference between loans on the world market and loans on the domestic market. On the domestic market the State have invariably a net return of tax which does not apply to a loan acquired abroad. We are not immune to the very high rates of interest which are being charged right across the world due to the scarcity of capital and the high rate of inflation which is worldwide. It is not realistic or even fair to suggest that we can be immune from the world trend at the present time.
Is the Minister——
We cannot have a debate on this matter. The Deputy has already had two supplementaries.
I was waiting to get in any at all, as you pointed out yourself. Could I just ask the Minister whether he is now saying that there is now no money available in any quarter of the world cheaper than the going rate here at home?
The rate offered here at home is related to world rates. There is money available elsewhere at varying rates for different periods, but the rate at which the loan was offered here was an attractive one and related to current world rates for long-term loans.
Apart from the gross mistiming of this loan, as pointed out by Deputy Lynch, is it not a fact that the Minister mended his hand and increased the rate of interest substantially? Having regard to that change would he not expect that the return from the loan would be much more substantial than it was, and does the small amount of loan received not reflect the failure of the Minister both in his timing and in his efforts to mend his hand?
The Deputy is being quite unfair. He knows that the going rate on the London market, which is a market in relation to which there is great mobility of funds between this country and Britain, rose by 1¾ per cent because of an emergency measure taken by the British Chancellor of the Exchequer. The only improvement that was made in the real interest rate on the loan here was as a consequence of providing an improved discount, an increase by .3. To have increased our rate by only .3 when one and three quarters was the increase on the London market shows that we did not panic and that we got a very satisfactory result. What perhaps Deputy Colley would have preferred would be that we would have offered the loan at an exorbitant rate of interest so that he could then come in and criticise us for offering the loan at too high a rate.
That was the Minister's suggestion, not mine. We did not have to do that.