Dáil Éireann díospóireacht -
Tuesday, 14 May 1974

Vol. 272 No. 9

Building Societies Bill, 1974: Second Stage.

Minister for Industry and Commerce (Mr. Keating)

I move: "That the Bill be now read a Second Time."

The operation of building societies is governed by the Building Societies Acts, 1874 to 1942. The purpose of the Bill now before the House is to simplify the procedures required under the Acts in effecting a merger of societies and to make provision for the guaranteeing by the Minister for Finance of certain borrowings by building societies.

It has been represented by the Building Societies Association that section 33 of the Building Societies Act, 1874, and section 19 of the Building Societies Act, 1894, which deal with amalgamations and mergers of societies—or unions and transfers of engagements as they are called in the Acts—were unworkable in practice since they required any society involved in a union or transfer to obtain the consent in writing of the holders of two-thirds of all its shares. The difficulty of fulfilling this requirement will be appreciated when it is realised that some of the bigger societies may have 30,000, or more, shareholders; societies of this magnitude were not envisaged when the present legislation in this regard was enacted.

The building society movement in this country is unduly fragmented and its rationalisation is desirable on a number of grounds. First of all, a general trend towards larger and fewer societies should mean greater efficiency and economy throughout the movement as a whole and should give savings in general management expenses. Such savings should lead to the provision by the societies of a better service for both borrowers and shareholders. From the point of view of the housing programme, rationalisation is desirable to ensure better co-ordination in the use of the very substantial amounts which the societies now provide in housing loans and to strengthen the financial standing of the movement as a whole.

I am aware that at the present time preliminary steps have been taken towards at least one desirable merger of existing societies. It would be unfortunate if the unduly onerous requirements of the existing Acts were to prevent the implementation of such mergers. Having considered this situation carefully, the Government decided that, notwithstanding the fact that a comprehensive review of the Building Societies Acts is being undertaken the present short measure should be promoted with a view to providing a remedy for the practical difficulties which could otherwise arise.

Under the law as it stands a union or transfer of engagements is a two-stage process. Firstly, the proposal must be agreed at a general meeting of each society by three-fourths of the members present and, secondly, the agreement must be confirmed in writing by the holders of not less than two-thirds of the whole number of shares of each society. Sections 2 and 4 of the Bill aim to simplify this rather cumbersome procedure by reducing the majority required for the first stage to a simple majority, and by providing for confirmation of the union or transfer by the Registrar of Friendly Societies as an alternative to the second stage. This alternative is seen as being much more practical compared with the procedure of seeking the approval in writing of, perhaps, some tens of thousands of shareholders. When the procedure of confirmation in writing by the members was written into the legislation a century ago, the existence of societies with some tens of thousands of members was hardly envisaged. The procedure of confirmation in writing is not being abolished and it can continue to be used as an alternative to the new procedure provided for in the Bill.

The purpose of Section 3 is to make statutory provision for the guarantee by the Minister for Finance of special borrowing facilities which, at the instance of the Minister for local Government and in co-operation with the Minister for Finance and the Central Bank, were arranged in October last between the Associated Banks and certain building societies. The background to this provision is that the Minister for Local Government became aware that in the light of the trends in interest rates which prevailed in 1973 and the resultant uncertainties in relation to the inflow of new funds, the societies found it difficult to assume forward commitments for loans on a scale appropriate to the needs of the private housing programme and of the house-building industry.

A series of discussions on this problem took place among the parties involved. It was clear that the societies' needs were not for immediate recourse to borrowing facilities but for an assurance that, in the event of their embarking on an expanded programme of loan approvals, fall-back borrowing facilities would be available to them at a later stage to meet any shortfall that the expansion might create in their net inflow of new funds. The Associated Banks, I am glad to say, co-operated fully in making available the kind of facility that was seen to be required and the societies for their part responded positively by means of an immediate relaxation of their lending policies. The total amount involved in the arrangement was £6 million, this amount to be drawn on at any time up to 30th June, 1974, and is to be repaid during the period of 12 months commencing in July, 1975. The provision in relation to the guarantee which is set out in the section is standard.

The Bill now before the House is aimed principally at the rationalisation of societies by simplifying the procedures for unions and transfers of engagements. It is relevant, I think, to mention in this connection that I have become aware recently, in the context of my responsibility for the registry of friendly societies, that there has been an inordinate rush to register new building societies. It appears that the increased activity is related to the Government's proposal to introduce comprehensive new legislation governing all aspects of building society operations.

I think it is right that I should use this occasion to emphasise that the comprehensive Building Societies Bill will provide for new requirements in connection with the establishment and registration of societies and that we regard it as reasonable that means should be found of ensuring that societies which have been registered as a result of the recent spate of applications, and other societies which, in effect, have evolved from a reactivation of old and dormant societies, will comply with the requirements to be prescribed for new societies. There is, therefore, nothing to be gained in terms of legislative control by registering a society now rather than after the comprehensive legislation comes into force. It is well, I feel, that persons who are thinking of setting up new societies or who are engaged in the preliminary processes involved in the registration of new societies should be made fully aware of this situation.

Mr. Brennan

There is not very much in this short Bill, but I am glad the Minister has promised us what he describes as a comprehensive Bill later. If this promise had not been made, we would all have been very anxious in regard to the whole question of building societies, especially having regard to the amount of controversy that surrounded the operation of these institutions recently. Originally we were aghast at being offered a Bill dealing only with two simple aspects of the situation and not dealing with the fundamental issue that must be tackled—the overall functioning of the building societies. These institutions are of great importance because of their role in the housing programme.

Without wishing to impute any motives, it would appear to me that the question of union dealt with in the Bill is merely a front for what is the real purpose of the Bill, that is, to make provision for moneys that have been borrowed already from the Associated Banks. I refer to the £6 million which, in panic, the Minister for Local Government beseeched the Associated Banks to lend to the building societies at a time when these institutions were themselves in trouble because of the unbridled escalation of inflation. The banks responded to the crack of the whip and lent the money, apparently without any guarantee. This Bill seeks, in retrospect, to guarantee that the Exchequer will be responsible for that money and, ultimately, for the collection of it from the building societies, together with interest and in accordance with whatever terms the Minister may arrange. I assume that is the real purpose of the Bill.

The Minister is making it easier for building societies to transfer their engagements. Perhaps it is of some significance that there is a proliferation of building societies taking place. There would not seem to be any great demand for cohesion, for the formation of fewer but larger and stronger societies. Regarding the statement that there is a spate of applications for new societies I should like the Minister to elaborate further in this regard in view of his having told us that in future there will be new requirements for qualification to comply with the comprehensive legislation promised. Is it meant by that that those societies registering now in accordance with existing regulations may be deregistered when the new legislation is enacted? The Minister has stated that they will not be exempted from the new regulations to be contained in the future legislation.

While the building societies are doing a tremendous job there are times when I fear for those who must seek assistance from them. I refer to the difficulties involved so far as the borrower is concerned. For instance, he is tied hand and foot before receiving the assistance required. Perhaps this is not relevant to the Bill, but it is an area that one would hope would be included in the future Bill to which the Minister referred and which will be introduced, we are told, when the probing into the operations of the building societies has been completed.

There is some degree of simplification required in regard to the procedure of obtaining loans. One of the first requirements of the societies is that an applicant must have insurance cover and, although he may be insured already, that insurance may not be considered sufficient and the applicant may have to become insured with, perhaps, another insurance company and one that may be nominated by the building society. Any expenses incurred in this way, together with fees and so on, are usually paid for out of the loan so that by the time the borrower receives the money a large proportion may have been deducted already. Any borrower I have ever spoken to has indicated his exasperation with the whole procedure. The delays involved in the payment of loans often force people to resort to bridging loans in respect of which they pay to the finance firms an interest rate of 19 per cent. This interest may have to be paid for a protracted period, usually much longer than anticipated, with the result that a huge amount of interest would have been paid before the loan from the building society becomes available.

The stage has been reached when the building societies are indispensable in so far as the construction industry, both public and private, is concerned. It is my hope that the Minister will be forced to adopt what is Fianna Fáil policy in relation to the updating of these institutions, that is, that they be relieved from income tax liability and so, enabled to grant loans at a lower rate of interest to the borrowers. The removal of income tax could result in the temptation to pass the advantage to the investors but legislation could be framed so as to ensure that the main benefit would go to the borrower. Perhaps a percentage should go to the investor, because to attract money at present the building societies have to have reasonably attractive rates of interest, and while there are so many other financial institutions competing who are paying such high rates of interest to investors, the building societies must find it difficult to get the necessary funds to carry on the work they are doing. Therefore, while relief from income tax is essential and, as I say, is official Fianna Fáil policy, we must ensure that not all the benefit of that relief is passed on to attract better investment by way of giving a higher interest rate on investment but that it would go mainly to the borrowers by way of lower interest rates on loans. This Bill has got nothing to do with that, but the Minister has, I am glad to say, promised a comprehensive Bill dealing with the working of building societies generally. It is a very welcome pronouncement, and I would like to say on behalf of this side of the House, with all sincerity that the sooner he can produce that comprehensive legislation the better. We shall then have an opportunity of going into this whole serious matter of lending for residential building purposes.

I would hope that at that stage the Minister would take the opportunity of having a serious look at this whole question of mortgages. The recent decision by the Government regarding secondhand houses has caused quite serious problems. People who are buying new houses cannot get rid of the houses in which they are living as readily as they might. In other words, this has succeeded in depressing the market without conferring any benefit on the purchaser. A more serious move could not be taken. That is the factual position as a result of the change made in regard to mortgage limits. These things are of great importance to our entire society, and the Minister's announcement about further legislation will help to allay the anxiety of people who felt that this Bill was the be all and end all of what we might expect in relation to building societies.

In regard to mergers of societies, the Minister says here that instead of a three-fourths majority of shareholders being required for agreement to the proposal, there would be substituted a simple majority; that instead of the requirement to write to all the shareholders, a statutory notice would appear in Iris Oifigiúil or some other paper stating that any objections should be forwarded within 21 days. This provision is understandable. The law as it stands is an example of legislation which has become obsolete by time. However, as I say this is a very simple Bill in so far as it relates only to that matter. The Minister is aware that there is one merger due to take place and I accept what the Minister says; I had a suspicion myself that it was to take retrospective action to secure moneys that had been handed out last year in a time of panic by the associated banks when the building societies found themselves in real trouble. However, whether that is correct or not, I do not think that we on this side of the House would have any serious objection to this Bill, particularly when the Minister assures us that comprehensive legislation is being introduced. At the same time, I would like the Minister to give us time to have a look at the Bill before Committee Stage in case there may be reason to have some simple amendments proposed. I do not propose to deal at any length now with the Bill as such. As I say, while the Bill deals with two important matters, they in no way affect the serious problems which lie at the root of the building societies vis-á-vis our economy, namely, building for residential purposes, the construction industry generally, and the future of building societies.

If there is a spate of applications for registration of building societies, which is undoubtedly prompted by the expectation of stricter regulations, the Minister would want to examine the matter carefully. I can understand finance companies who are lending for types of building other than residential building being in a position to pay higher rates on investment and getting higher rates from borrowings but if building societies are confined to lending for residential building and doing a social service, as by and large they are supposed to do in that respect, I cannot understand that there would be a rush for registration of new companies at a time like this when there are so many other opportunities for investing money at high interest rates. However, perhaps what the Minister says is based on the knowledge that there is a spate of applications coming in for registration and that they are seeking to beat the dateline of what might be more stringent registration requirements later on. The Minister will, I am sure, clarify the position when he comes to wind up, whether what he says is another way of stating that such societies will find themselves not registered, that if new regulations are brought in they would be retrospective to a date which might be justifiably regarded as being a date at which these people could be suspected of trying to register in anticipation of stricter regulations, the deadline for which they tried to beat.

I would be prepared to facilitate the early passage of this Bill through the House except that, as I have already said, we should have some time before the Committee Stage to put forward amendments. As regards the guarantees for the £6 million which has already been handed out to the societies since 18th October last, the terms and conditions are to some extent at the Minister's discretion. Perhaps it might be necessary to spell out the period over which the money must be repaid with interest. Section 3 (1) (a) states:

The Minister for Finance may, if he so thinks fit, guarantee in such form and manner and on such terms and conditions as he thinks fit the due repayment by a society of the principal of any moneys borrowed by the society from an Associated Bank between the 18th day of October, 1973, and 30th day of June, 1974, or the payment of interest on such moneys or both repayment of the principal and the payment of the interest and any such guarantee may include a guarantee of payment of incidental expenses arising in connection with such borrowings.

It is obvious from that section that the conditions the Minister will apply are vague, that he may impose such terms as he considers appropriate in the case of both principal and all the interest. Is this a matter to be negotiated with the people who have borrowed the money or the people from whom it was borrowed? Naturally, those who have borrowed would seek to get the most generous terms possible in regard to repayment. Was any guarantee given, verbal or written, at the time? On what conditions did the associated banks issue the £6 million? How do they expect it to be repaid? Was there an assurance that the finance companies would be in a position to repay it over a period? Was there an assurance that the Government would come in with a guarantee such as is enshrined in this Bill?

To a great extent this is an unusual procedure in that it provides for guarantees in retrospect after the money has been borrowed. I should like to be in a position where I could go to my banker and say that I wanted £6,000 or £6 million and that he would get a guarantee sometime next year that he would get it back. Banks do not usually part with money on terms as loose as that. I take it they had some assurance that such a guarantee would be given. These are points on which the Minister will, no doubt, elaborate when replying, if I am reading the Bill rightly—perhaps I am not. To me it appears to be unprecedented. At the same time, I see no objection to the Bill. I believe the necessary guarantees must and should be given. I am pleased that the comprehensive legislation about which we are all concerned will be forthcoming and, I hope, in the near future.

Mr. Esmonde

I welcome the Bill. I am aware that difficulties have been encountered by developers. When they have looked for support and finance from building societies where the development is a large one they have found difficulty in obtaining the business interest of a building society in the development in view of the amount of money involved. This appears to indicate that there are few societies in the country of a size sufficient to deal with the larger developments. In some cases I think developers have sought to come to an arrangement with financial institutions outside the country in order to get finance. When a developer wants to develop a considerable area of property he must prefer to have one building society with which to deal because that building society would study and know the title to the property and the various details associated with the building development and subsequent leasing to purchasers. This makes for ease of management and means in effect that when the first two houses have been erected and leased or sold the title to the other houses follows in the same pattern. That suggests the requirement of further legislation which will no doubt be considered by the Government because it seems a little ridiculous that the purchaser of the last house in a 200 or 300-house estate has to pay the same fee to the society's solicitors as the first person had to pay when the title is exactly the same and the investigations and requisitions are just automatic. It is really 200 repetitions of the first case. These matters require looking into.

I am also glad that the Minister has referred to this future legislation and in particular to the spate of applications for new registrations of building societies. I am a bit doubtful as to whether the full reason is that pending legislation might affect the building societies situation. My own information and knowledge indicate that some of these registrations are for motives other than those suggested by the Minister in his opening statement. I think many of them have been made for the purposes of a certain tax structure availed of by developers. That type of situation indicates an unhealthy condition in the world of building societies, a situation which I am certain existing orthodox societies would not like to see continuing or developing. When that situation is created the viability and trustworthiness of these many new societies—if I may so describe them—may be in doubt. I think it is necessary to have a tightening up in existing legislation which, as indicated by the Minister, goes back to 1874.

As this Bill is here for a specific purpose I do not intend to make any other remarks in relation to building societies and legislation except to agree with Deputy Brennan that the unfortunate borrowers nowadays have to go through a mountain of difficulties before they can obtain loans from building societies. Although it may annoy certain people associated with the building society movement I think it is fair to recall the saying: "Big fleas have little fleas on their backs..." It is a well known fact that in relation to the obtaining of money from building societies there are many people obtaining commissions in relation to loans or insurance, a matter which has been referred to by Deputy Brennan. Some people obtain commissions on that type of activity. I should like to see that type of activity cut out because if there is to be any justification for the establishment of further branches of building societies it should be unnecessary to have these agents for building societies.

Dr. O'Connell

I welcome this Bill in so far as it makes some effort at rationalising building societies. It is well accepted that building societies have come in for considerable criticism in recent times, and justifiably so. Many Deputies may have seen the "7 Days" programme on building societies. I was astonished that an inquiry was not instituted immediately into the activities of some societies as a result of that programme because we saw an open admission on it by a director of a building society that there were abuses of building societies rules and regulations.

In this Bill we are talking about rationalising building societies and guaranteeing certain borrowings by building societies, but we are doing nothing about the blatant abuses of the rules and regulations by certain societies in this city. After hearing about block loans being made I wondered why we did not have an immediate inquiry. It is a really serious abuse where a building society can favour a particular builder and offer him massive loans. This gives him an unfair advantage over other builders and at the same time confines borrowers to a particular type of house. This is not in keeping with the purpose for which building societies were established.

We saw on this programme also where there was favouritism in regard to family interests, where money was advanced for purposes other than the purchase of houses. This is an open abuse of the building societies' rules and regulations. I was astonished, having heard that, that we did not have a public inquiry, particularly in view of the fact that building societies are receiving special tax concessions from the Government. I feel very strongly about building societies and I wonder why we did not have some form of inquiry into them.

The Government should be in a position to have an inquiry into block loans, family interests obtaining money, companies under different names receiving money that should have gone to the public, and money being advanced for purposes other than houses—for big businesses, office blocks, public houses and so on. This all calls for an inquiry into how building societies are carrying on their affairs.

We should also have an inquiry into the excessive spending on advertising by the building societies. I hope that this rationalisation will put an end to this unnecessary spending which in the long run must be borne by the members and the would-be borrowers. In my view it is also wrong that a solicitor to a building society should be a director of that society. This is a fact in the case of one particular building society in Dublin. I am astonished that there is no means by which these societies can be made to conform to the rules and regulations under which they were established. There must be some control when the Government can guarantee money and finance for these societies.

I can recall mentioning in the Dáil some years ago about a building society introducing a special rule whereby a man anxious to go forward as a director of the company must submit his name by the December before the annual general meeting. However there is a rule whereby a man can be expelled from a society without being given any reason. This was used in a particular case to prevent the man putting his name forward as a director of the society. A number of other methods were tried but he was prevented by this new regulation introduced by the society itself, with the approval of the registrar of building societies. This was an open violation of the rules of building societies, but again nothing was done about it.

If one attends the annual general meeting of one building society one sees the farcical thing that happens. If anyone tries to go forward as a director he finds he has not access to the list of members of the society. The family of one of the directors of this society is on the board; they control the whole lot. This is a major building society, the building society in Ireland, and one family controls it. It is astonishing to think that this can happen when we talk about Government control and the Government guaranteeing the borrowings. This is not right.

We should have some investigation into the rules and regulations of building societies to see that they comply. I wonder what is the purpose of the building societies setting up branch offices throughout the country. We have more branch offices of building societies in Dublin than ever before and I wonder are they justified. Is it correct for an auctioneer to have a building society adjacent to his own auctioneering office? Is this ethical? In my view it is a serious matter and a matter which should be pursued by the Minister concerned. When we talk about rationalising building societies we should consider these matters. We should also see that the annual general meetings of building societies are held at a time when it is possible for ordinary members to attend—for instance, in the evening time. On a number of occasions I have forwarded complaints regarding this matter to the building societies and they informed me that nothing could be done. There should be some provision for the ordinary members of those societies to have a say in the running of those societies.

We should see to it that the incidentals which arise when a borrower is obtaining a loan from a society should be streamlined. There are many other expenses added on besides the interest rate which make it very hefty for the ordinary borrower. Some effort should be made to reduce these expenses to the minimum. The agency fee is wrong and the commission charged by building societies for insurance on houses should be eliminated. This is an unnecessary burden on the ordinary borrower and attempts should be made to put an end to it once and for all. This is the way we should talk about rationalising building societies and if we do this we will be doing something positive for the ordinary person who is overburdened by the present high interest rates.

Mr. Timmons

I should like to be associated with the remarks of Deputy Brennan in welcoming this measure as a first step forward towards the eventual rationalisation of building societies. It is true that some societies have departed from the original idea they were founded for. Fianna Fáil set up an inquiry into the activities of the societies, and I understand an interim report has been presented. However, I believe it has not yet been finalised and that other investigations are being carried out. I represent the constituency of NorthEast Dublin where there are a big number of people who obtained mortgages from building societies. There is a growing feeling of uneasiness and dissatisfaction among the community that could lead to social unrest. This has arisen because of the crippling burden of interest rates these people have to bear.

Any young married man is faced with repayments of between £12 and £15 per week out of his income to building societies. In some cases it is a lot higher. Organisations in the city who have taken this matter up and have held public meetings are gaining support in their efforts to change this system. It is my view that where people are endeavouring to provide their own home they should not be burdened by an unfair rate of interest. The high repayments are crippling the young couples and leading to serious domestic problems and medical problems. I know of women who are worried because apart from this huge commitment involved in providing their own homes they have other commitments from the point of view of goods and certain charges and, on top of that, they are placed in the predicament of having to travel many miles into the centre of the city. They are, as it were, living in isolation and this is producing a serious social problem. From meetings in my own constituency I know that this can lead to social unrest. The Minister and the Government should give an indication as to what policy is with regard to housing, whether it be local authority housing or housing in the private building sector. The matter is a serious one from a social point of view.

Reference has been made to charges which the unsuspected borrower is not fully aware of when he goes to borrow money. A very high fee has to be paid before a loan is processed and there are incidental charges against the loan. Following on that the borrower has to raise the balance of the money. All these are matters to which we must address ourselves on a technical measure like this. I feel very strongly about this because so many people trying to buy their own houses are affected. I appeal to the Minister to give some indication of what Government policy is in this very serious social matter.

Mr. B. Desmond

I appreciate the fact that this Bill is of a restrictive nature. Its purpose is twofold. First of all, it is designed to simplify procedure affecting mergers and, secondly, to provide a guarantee by the Minister for Finance of special borrowing facilities by the societies. The Bill is a narrow Bill but a very necessary Bill. It is one both sides of the House welcome.

I want now to refer to the undesirable rush of registration and pending registrations of new building societies in recent years, particularly in the last 18 months. In my opinion, a prestigious name or a name with historical connotations may overtly give the impression of major standing in the community. I want to make it very clear that such a title is no assurance whatsoever of financial viability or propriety. I hold that view very strongly. This is something the public should be made aware of in regard to all societies but particularly in regard to the newer registrations.

I also have reservations about some of the advertising that goes on. We do not have the protection of a Trades Description Act. We have no protection against misleading information, information which may give the impression that money invested in these societies automatically goes into social benefits. In fact, a higher proportion of investment, as many of us know, of some of the new building societies goes into nothing other than spurious fronts for the purpose of personal property speculation. People who are investing money in these newer societies should inquire of the directors as to whether or not their money is being invested in houses or in office blocks, in houses or in shopping centres, in houses or in personal loans to the directors so that they may be enabled to convert, for example, houses into flats to provide lucrative incomes for themselves.

I strongly support the original purpose of building societies. That purpose was and still overwhelmingly is to provide money for housing. By and large, building societies still observe that fundamental principle. I have, however, some misgivings about the role played and I shall come back to that later on. The original purpose of some societies has been distorted because of the activities of fly-by-night speculators, mostly Irish, who are now screaming their heads off about the wealth tax. They are setting up new building societies or re-activating dormant ones and enjoying the cream of the tax concessions. Outdated legislation is being used for the purpose of tax avoidance.

I welcome the warning given by the Minister that these people will find themselves caught retrospectively. I am no great lover of retrospective legislation but when I see Irish speculators benefiting themselves through the medium of the loopholes in the 1874 to 1942 Acts, and taking advantage of the situation, I sincerely hope the Minister will sting them sharply and painfully retrospectively under legislation which will be introduced later this year. I know the Minister is anxious to have this legislation as quickly as possible.

In making these harsh comments I want in no way to affect public investment in established and reputable building societies. About 60 per cent of loans to people to purchase their own homes is provided by these societies. A warning— which is not political but personal—that one might give to Irish people would be to be extremely careful and well-advised and to invest only with the more reputable and established building societies. They should not be taken in by any high-faluting name which might be thrust at them. In future legislation the Minister should ensure that there are rigorous safeguards in relation to investment. This is outside the scope of the Second Reading of this Bill. As registrar the Minister should ensure that in future there will be very fundamental protection for investors, both by regulation and by statute. These are my reactions.

Finally, I think we may have to face up to a situation where the social and economic role of the building societies may have to be changed. In the long-term I believe that the State in the common good should have an expanded role in investment, particularly in relation to the provision of money for essential housing. It may be that in the long-term we shall see the establishment of State-sponsored national building societies. This is overdue. We have not had such a company. Many European countries have such societies. I should be glad to see the setting up of a State-sponsored national building society on the lines of the ESB which would provide gilt-edged investment opportunities for the people and, above all, a guarantee that the people's money will be used to build houses and not to build up the personal fortunes of those who abuse the building societies' structures.

That is a comment I wanted to make. I am acutely aware that this would require a major change in the social and political attitudes of our people. An increasing number of questions are being asked about the operations of building societies. I feel that the people will come around to that point of view. They will not regard it as socialist heresy that somebody should advocate in Dáil Éireann the setting up of a State-sponsored national building society. The people have been stung a little bit recently by inflation in some of the charges of some of the building societies. I refer particularly to charges relating to servicing, advertising and legal fees rather than to mortgage interest rates. There is little one can do about mortgage interest rates except provide a State subsidy. I do not believe in subsidising companies to that extent as distinct from subsidising the unfortunate borrowers, and that is outside the scope of this Bill.

I welcome the Bill. I commend the Minister for introducing it. I hope that the many guarantees which we feel are desirable shall be introduced as quickly as possible.

Mr. M.E. Dockrell

I wish to pass a few comments on this Bill. I welcome the Bill very much and am glad to see that the whole House welcomes it. It is the first step in a direction which is desired by everybody, not least by the building societies themselves. I will declare my interest—as the saying is at the moment—I am connected with one of the Irish building societies.

The building society movement is one of the finest ideas which was ever thought up by men to help each other. It started less than a couple of hundred years ago. A group of people somewhere in the north of England was formed. They were working-class men. They paid in money week by week. There were probably 12 or 20 of them. When sufficient money had been collected they had a draw for a house. That was the beginning of the building society movement. They elected secretaries and treasurers to look after the affairs of the society. A committee was formed from among the men who paid in their money every week. In due course the movement grew to such enormous proportions that, as I heard in London last week, the building society movement at the moment has now reached £18,000 million and will very shortly be increased to over £20,000 million.

It is one of the greatest forms of banking and one of the greatest financial institutions in that country. It is also becoming so in Ireland. The building societies have been pressing for a number of years for the Government to bring the legislation up to date to enable them to deal with this rapidly growing movement. They can recognise that certain dangers exist in the present situation and that it is too easy for certain societies to get a licence and go ahead.

I welcome the Bill and congratulate the Minister for having brought it in. There are special reasons at the moment why such a Bill is necessary. Although it is rather difficult to do so on the floor of the House, I should like to try to dispel certain misconceptions which have arisen in the minds of the public and in the minds of some of the people here. It has been said that there are too many societies. There are not very many in Ireland. It would not be a good thing to see those numbers greatly reduced. There are only five or six of the companies who belong to the association which try to regulate their affairs in the interest of the borrowers and in the interests of the depositors. It was mentioned here that there are a lot of branches. It is always popular to attack building societies because of the number of branches they have. Building societies compete with each other in the sense that banks do. Therefore, if there are branches in a street a building society will want to get a share of the business in that street or area. What is more important is that there are many other financial institutions which are endeavouring to attract that very scarce and important commodity, money, into their coffers. If the building societies do not have branches readily available to the public, the public cannot come in and deposit their money. They will go to other institutions which are crying out for their money and so the money would be lost to the building society movement. Not only would this radically affect people who wished to own a house but it would affect the whole building programme. No Government can afford to neglect the building society movement because it is so important to the supply of new houses, especially for young married people.

Mention was made earlier of the fact that new houses have a priority for loans. That is good but very often the purchase of a new house means the sale of an old house. An old house may not really be old. It may be occupied by only the second family in its history. If the sale of old houses is held up or prevented it can have a slowing down effect on the sale of new houses. Newly-weds form a large proportion of new house buyers, but they are by no means the only buyers. Some people move into smaller houses when their families have grown up and gone away, so there is a constant buying and selling of houses both new and second-hand. If one interferes with that normal process unduly it can have the unfortunate effect of slowing down the building and the occupying of new houses by the very people the Government wish to help.

The question of advertising was raised. It was said that too much money is spent by building societies by advertising. Were is not for the number of advertisements the money which comes to building societies would go to other financial institutions.

The last speaker talked about nationalising the building societies. This would cost a sum of money which no modern State could raise without the greatest of difficulty and indeed might find it physically impossible to raise. Even if it were possible to raise it I do not think this would have any beneficial effect. I do not think it would lower the mortgage rates. It might very easily have the opposite effect. It could also be a great temptation to a Government to use that as a weapon to further their own political aims which might not necessarily be in the interests of the homeowners and still less perhaps of the country as a whole. I would not be at all in favour of that. Of course, the Minister has not put that forward. It is not a practical proposition now but the time may come when financially it could be done. I very much doubt if it would be in the interests of the borrowers.

The fundamental system of the building society is very simple. People come in with their money and lodge it and then individuals are lent money. If anything interferes with that or if the building societies do not offer the depositors sufficient interest in return for their money they walk by and young people and indeed old people looking for houses cannot get advances. We are living in a time of very dear money and that is having the most unfortunate, indeed sometimes tragic effect on individuals who have borrowed money. They see their weekly payments going up and sometimes it is a real hardship on them to pay. As long as money is as expensive as it is at present it will continue to be expensive to borrow money from the building societies.

There is the question of the fees charged by the legal profession. That is something for which the building societies are sometimes blamed but it is something over which they have no control. That is a question for the legal profession to deal with. The building societies are powerless to reduce charges which they themselves have to pay.

I would say to the Opposition that the Minister has done very well in introducing this Bill. I think he is hoping to bring in the main Bill later this year. Without being nasty to the Opposition, they had many years to bring in a Bill, years during which the building societies and their association asked for legislation to strengthen their hand and to tighten up entrance into the building society area. They did not get any speedy response; they certainly did not get a Bill, which is what they were looking for. I thank the Minister and I hope we will have the main Bill as soon as possible.

Mr. Lalor

In the debate so far there has not developed any feeling that this is a controversial Bill. Our spokesman, Deputy Brennan, welcomed the introduction of what the Minister described as a simple piece of legislation. Deputy Dockrell's remarks about the years the public and Members have waited for this legislation surprised me. The Minister pointed out that the two major portions of the Bill were forced on him: first, because of the desirability of enabling a merger of two existing building societies, which he mentioned in the report as being imminent if some facility can be provided to enable this to happen; and secondly, the enabling section, which would have allowed the Government to have stepped in last October, is urgently needed. This will enable the Minister for Finance to stand over the necessary lending and the welcome arrangement whereby the banks promised to make available £6 million to the building societies to enable them to perform their functions. From that point of view, I do not think anyone can allege neglect by Members on this side of the House.

As I see it, the two building societies at present endeavouring to arrange a merger are probably the reason for sections 2 and 4 of the Bill. The Minister was complimented by Deputy Dockrell on the introduction of the Bill and the promise of imminent effective legislation covering wider aspects of the building societies which is urgently required. Although sections 2 and 4 are enabling sections to deal with mergers, for the last 15 months the House has been waiting for legislation in connection with monopolies and mergers, which was promised a long time ago. Depending on one's point of view, that legislation could be regarded as much more important.

Although my comments might be more appropriate on section 2 on Committee Stage, it might be no harm for me to convey my views on the section. The Minister pointed out that the procedure built into the old Building Societies Acts from 1874 to 1942 made amalgamation extremely difficult and I agree it was necessary to introduce a more simple form. The Minister mentioned it was extremely difficult to arrange a merger under the existing Acts in that a meeting called to decide on a change would have to arrive at a decision by a three-quarters majority and, subsequently, the members would have to accept it by a two-thirds majority. Working on the Minister's figure of 30,000, some 20,000 of the shareholders would have to write in signifying it was acceptable to them. I do not know if there would be difficulty in getting a three-quarters majority, but I notice that the proposed change states that a simple majority would suffice. Has the Minister considered the change which would have envisaged a two-thirds majority at that stage?

There is mention about a straightforward majority of the members of each society concerned with a merger being present at a general meeting convened for that purpose. In the calling of a general meeting, is there any provision that each of the 30,000 members are called to the meeting? I presume the members would be told that a certain building society were proposing to merge with another society, or that a society were proposing to transfer their engagements to another society? I would ask the Minister to tell us if this is built into a previous Act, that this change does not alter an earlier provision that all the members are summoned to the general meeting and are notified of the intentions of the building society. If members have an objection to the proposal, they should be given an opportunity to oppose it. This provision should be built into the legislation.

Section 3 deals with the arrangements which had to be made last year where the banks agreed to stand by the building societies to the extent of £6 million. The Minister said that the money which the building societies borrowed would be drawn on at any time up to 30th June, 1974, and is to be repaid during the 12 months commencing July, 1975. The impression I got from section 3 (7) was that there would be two years where money borrowed at the end of April or May need not necessarily be repaid until April or May, 1976. The guarantee was that the money would be repaid with interest within two years from the date of the advance of the moneys out of the Central Fund.

The Minister for Local Government and the Minister for Finance made this arrangement with the Associated Banks. Is this an on-going thing? Supposing £9 million has been borrowed by a number of building societies under this arrangement, it appears to me that in the year commencing 1st July, 1975, they will have to pay back £5 or £6 million. At that stage, will that not bring great pressure on the building societies, pressures which will react to the extent that they will again have the problems which existed last October, that is, the non-availability of money for lending?

Is the repayment of this £5 million within a two year period the wisest thing to legislate for? There is a provision under subsection (8) which visualises that all the money will not be paid back by that time. I presume that in the four-sided discussions which took place between the banks, the Minister for Local Government, the Minister for Finance and the building societies last October, this was looked on as a temporary measure. In his reply will the Minister tell me if section 3 is an on-going section whereby this £6 million is available all the time to be drawn on, paid back, redrawn and again paid back within a two year period and whether the building societies are getting themselves into a serious position from an interest point of view? The building societies were in difficulties last October. That coupled with the warning which we heard this morning from the Confederation of Irish Industry, was frightening from the national point of view.

Over the past 12 months every Government spokesman drew attention to the comparison between the unemployment figures existing at that time and the figures for this year. We now have a situation in the first week of May, 1974, in which we have greater unemployment than we had in the corresponding period last year.

The accumulation of difficulties will have very serious effects. Maybe, at this stage, the Government are looking forward to this three-year period whereby there will not be great demand for money for the building of houses. In two years time people may have reached the stage where the building industry will be in a coma, where no building will be going on with no requirement for loans from building societies. Up to now the Government have been in a position to say that in comparison with last year there are fewer people unemployed now than there were in the corresponding period last year. Exactly 12 months after the Coalition Government took office we have a situation in which there are 68,155 people unemployed compared with 68,015 unemployed last year, an extra 140. As Deputy Coogan so aptly says from time to time, it is only the tip of the iceberg.

In section 3 (3) it is stated that the Minister for Finance will be laying before each House of the Oireachtas a statement setting out with respect to each guarantee under this section given during that year in connection with a loan, particulars of the guarantee in cases of payment by the Minister. When this Bill is passed, will the statement be laid before the House giving the amount of money outstanding on the 1st or 6th April this year?

In his opening remarks the Minister issued a warning, it could justifiably be put that way, to new societies being created. Just because they are setting themselves up now they should not think they will escape having to abide by whatever regulations are made. He also referred to reactivated or new bodies developing from dormant societies. I agree fully with him on this. If he introduces legislation and endeavours to get at newly formed societies or re-enlivened dormant societies, it will be very difficult to put through measures covering societies of that nature, the ones which have been actively in existence and which have been looked upon in a good light over a period of years. I presume that there should not be any difficulty so far as they are concerned in falling into line one way or the other.

Many of the views expressed about the building societies over the past 12 months draw attention to the competition between existing societies and the spending of money in various areas—the spending of capital in building new offices in order to project themselves in individual areas. I agree with the Minister when he says that fewer societies should mean greater efficiency and economy throughout the movement as a whole and should give savings in general management expenses. That should encourage the Minister to let the country see the proposed new legislation to deal with building societies as soon as possible. When there is a vacuum and a threat of legislation there is a temptation to rush in. It is very difficult to get effective retrospective legislation covering this type of thing. Following the threat of the auctioneers' and estate agents' legislation I think I was the only Deputy who did not take out an auctioneer's licence.

Mr. Keating

That makes two of us.

Mr. Tunney

That makes three of us.

Mr. Lalor

Now that the threat is there, the sooner that legislation can be seen the better. There is no doubt that we need a little competition between building societies but we do not want a surfeit of it. The fact that we have 20 or 30 affiliated societies means that a tremendous amount of people's money is being used for purposes other than those on which it is purported to be spent.

Mr. Tunney

I should like to associate myself with other Deputies who have welcomed the proposed legislation. I must say how difficult I found it to listen to Deputy Dockrell associating present-day building societies with the humble men of the last century who got together to pool extra moneys for the purpose of building houses. It is fair to say that the present-day sophistication of the building societies is far removed from the spirit of their humble origins, to which Deputy Dockrell referred, when the raison d'etre of the building societies was the building of houses for people, presumably subscribers. Since then building societies have been used as the via media through which certain people built office blocks at home and villas on the Continent—not for subscribers.

It may be popular at the moment to be unduly critical of the building societies but it can be said in all honesty that, over the past few years, building societies have given grey hairs to people who sought to build houses through their agencies. They also contributed to the grey hairs of politicians who endeavoured to make inquiries or representations on behalf of prospective borrowers, or on behalf of people who were promised a loan by a society a year before and who had not yet been allowed to enjoy the benefits of the promised loan.

I have a reservation about the proposed merger. We must bear in mind that all these societies exist for the benefit of the would-be house purchaser. I should like to have an assurance that there will not be a continuation or a development of the terrible, frightening and frustrating anonymity of the building societies. We all know that there is not any warmth—if there is, there is no evidence of it—in the manner in which building societies operate. I make this comment from my own experience to date.

After the passing of this legislation, if I feel disposed to make an inquiry, will I find it more difficult to get anybody in these offices to identify himself or herself with the application about which I am making the inquiry? I am sure the Minister would agree with some of the criticisms made of the building societies. I hope he has made provision against that which I feel may happen. There has been a certain amount of recession but, at the same time, housing is a sellers' market. I said during a debate on housing that, if the Good Lord had foreseen what is happening at the moment in housing at different levels, what the prospective buyer is being asked to pay for loans and for legal fees and for what I would regard as sharp practice in the cost of his house —when a price of £6,000 quoted today rises to £6,500 inside a couple of months. He might have had second thoughts about advising us to increase and multiply. The sooner the better it is accepted that there must be restrictions to protect the unfortunate person, whose ambition is the natural one of having his own house, from the many people who over the past ten to 15 years have risen from practically nothing to the millionaire class. They are in the building industry and the building societies. It is obvious to me, without searching too deeply, that there are excessive profits being allowed to these people and I would be hoping that the Minister would be able at least to say that what is envisaged here would be to the advantage of the prospective house buyer.

We can hope, as the Minister has said, that a general trend towards larger and fewer societies will lead to greater efficiency. On the other hand, it may lead to a point of diminishing returns and it may become more expensive. Worse still, it is my experience that it will lead to frustrations and annoyances because of the terrible anonymity to which I have referred.

I will not refer to the relative merits of the left or the right, as posed by Deputies Barry Desmond and Dockrell, respectively, in regard to the building societies and the building industry. As far as I am concerned, that which affects the would-be householder is the concern with which I most sympathise and I am hoping that when he replies the Minister will indicate it is his concern too.

Mr. Enright

I welcome the Bill. On numerous occasions it has been put on record in the House that the building societies are the people who have furnished loans to married couples who wish to own their own houses. I would hope that the same type of loans will continue to be made available by the building societies to young married couples and to others desirous of owning their own houses.

As well, building societies have been investment sources for many people who were able to place their money in them and obtain a fair rate of interest. This is an important aspect of their work. It has been mentioned in the report commissioned by the Minister that building societies are on the increase and it has been said that this will lead to increased costs. It is logical to assume that if there are more building societies it will lead to an overlapping or a multiplication of costs. More societies would need more floor space in office blocks, there would be more staff to pay and there would be a multiplication of advertising in newspapers and television—in other words, a multiplication of effort. Even at the moment this is far too prevalent. If some of the extra money involved could be saved, it would be to the benefit of all. Therefore, the Government should make every effort to facilitate mergers of building socities.

Building societies have been passing through a difficult period in the past few years. Merchant banks and other finance houses have improved their interest rates, stocks and shares have improved and, therefore, people have been less inclined to invest in building societies, who have consequently had a falling off in investment. Nevertheless, I believe our people still have enormous confidence in these societies as a means of investment and I hope this confidence will continue.

In regard to the funds available for house loans by building societies, I recommend that the Minister would make every effort to ensure that such funds are controlled. It was mentioned that some large building organisations have arrangements with the building societies, that such builders are able to obtain large blank terms which enables them to service individual loans so that house purchasers do not deal directly with the building societies. I hope the Minister will be able to make a definite statement on this so that the position will be clarified. Such an arrangement is not satisfactory. It is not a safe way and if it is a prevalent practice, I hope the Minister will see that it is stopped.

Another point is in relation to funds that have been used by building societies in large office blocks and so on. I thought that the main purpose of building societies was to finance the purchase of houses for young married couples. Funds at present being used for office blocks and so on I hope will not be allowed to continue to be used in such a manner. I would think that the building of office blocks is not a desirable way of spending building societies' moneys. Rather should such moneys be utilised to help people obtain their own homes and enlarge the building industry in this country.

I should like to pay a small tribute to the local authorities of this country for the manner in which they have contributed helping young families obtain their own homes. Certainly local authorities are financing a huge amount of building at the moment. I believe they are to be complimented on the work they are doing in obtaining moneys from the Local Loans Fund, from the Government, and I hope this will continue. It is important that some effort be made by the Minister to try and enlarge the scope of local authorities in the building industry.

An Ceann Comhairle

I do not wish to interrupt the Deputy but matters appertaining to loans from local authorities would be a matter for another Estimate.

Mr. Enright

Then I would seek the advice of the Chair: what I am getting at is that it may prove that some local authorities might be able to obtain some form of stock to finance loans. In other words, over the years it may prove necessary to allow an extension of local authority activities to obtain moneys in the form of stock and then release the money to people to erect their own houses. I shall not pursue the point but it may prove that it would come under Bills such as this in the future. But if the Chair feels it would be out of order at the moment I would be happy to accept such a ruling.

An Ceann Comhairle

This Bill deals specifically with building societies. There will be an opportunity afforded Deputies to discuss local authority loans at another time.

Mr. Enright

I welcome this Bill. I believe it will help reduce the costs of financing building societies. If it does that, if it means that over the years more families will be able to obtain loans from building societies with which to purchase their own homes, then it is indeed desirable, is to be welcomed and I compliment the Minister on it.

Minister for Industry and Commerce (Mr. Keating)

I should like to thank my fellow Deputies for a constructive and good humoured discussion on this small Bill. It must be emphasised that it is a small Bill. I said that there is a comprehensive piece of legislation coming in relation to building societies and coming as quickly as we can possibly get it before the House because this Government are satisfied that it is an urgent matter and we appreciate the concern of Deputies with it. In the debate I think people may anticipate a little the speeches they might make on the comprehensive piece of legislation and they broadened the issues far beyond the two-essentially two —matters in this Bill. If in endeavouring to reply to the points made I am a little disorganised it is because I find it not easy to listen and simultaneously to organise my thoughts into coherent speech. Also I think it desirable that I limit what I have to say to the matters that bore directly on the Bill because we do have a pressure of work in the House and we will have the opportunity, in a much more extensive way, in a much wider Bill in the fairly near future, to discuss the whole matter at much greater length.

Deputy Brennan said he thought the real purpose of the Bill was not to facilitate mergers but to provide guarantees in regard to the loan of £6 million. I can assure Deputy Brennan—and indeed it was evident from the speeches of other Deputies on both sides of the House that they were familiar with the position—we are being urged briskly by these two companies wanting to get on with the merger to clear the road for them. We think it desirable that they do it and this Bill is an effort to facilitate them quickly. Had it not been for the pressure, in this context of a single merger, the matter of the guarantee could have waited until the later legislation or indeed, I understand, could have been dealt with under other legislation. For example, I am advised that it could have been brought before the House under something called the State Guarantees Act. Therefore there were other mechanisms open to us. It just happened that we wanted to facilitate people doing what we thought was a sensible thing and we took the opportunity of putting two things together. We thought it would be too long to wait for the much larger Bill in the offing.

Let me try to say something about the matter which exercised a number of Deputies, about the rush I mentioned on the part of new societies to get registered or on the part of what one might call—without meaning the word offensively—moribund societies to be revitalised prior to the bringing forward of the major piece of legislation. The purpose of the warning that I issued was to suggest to them that they were wasting their time because I am advised by the experts on the drafting of legislation that it is perfectly possible, without retrospection either, to have a legal mechanism that will ensure the new rules will apply to them, the new rules under the comprehensive legislation, and that they will not be able to have a relatively advantageous position by registering now. I do not want to anticipate what may be the final decision as to the best way of achieving this objective but there are at least two causes: a precedent for one such course is the Central Bank Act of 1971. The precedent in that case would indicate that all registrations would be terminated on a specified date, that all societies would be registered, and that would apply to everybody—because of course there is not much point in having a fairly fundamental piece of new legislation if it is not able to alter the circumstances of the existing companies, whether they have been in existence for a long time, have been trading vigorously and have enjoyed the highest reputation which applies to many societies, or whether they are societies that have been set up very recently or societies that have been revitalised. One wants to be able to change the circumstances anyway. The alternative would be not to deregister any, which would simply be to require all societies to comply with conditions relating, for example, to such things as liquidity, financial reserves, the financial state of the directors, in regard to a number of aspects of building societies to which reference has been made over the past year or so. Either of those mechanisms would ensure that no advantage would be gained by this rush and that it is in fact a waste of time on the part of the people undertaking it.

I will try to deal with some of the points made by Deputy Lalor. He asked in regard to mergers whether it was a good thing to go all the way to a simple majority of the meeting. The proposed change is from three-quarters of the meeting to a simple majority. I would agree with him that this would be going too far if that were the sole criterion of amalgamation but it is one of two conditions. Deputies will note that the second half of the existing merger mechanism can be retained if people wish it. The new second half, which is being proposed, is that it be made the responsibility of the Registrar for Friendly Societies to confirm or refuse. He has a second look and if there is any wish on the part of people to make representations to him they have time to do so before the merger is confirmed.

This brings me to another point which was raised. If there is any suggestion that there was not a wholehearted and thorough circularisation of all the people entitled to attend the meeting, if there was a selective notification with a desire to produce a wished for result, then the mechanism exists whereby this can be brought to the attention of the registrar. He retains the second barrier to the merger. In those circumstances, I think the simple majority is permissible. If it stood alone it would be too little and I would go along with the suggestion of two-thirds rather than a half. I think, coupled with the second safeguard of the scrutiny and the power of veto in the hands of the Registrar for Friendly Societies, that it provides a mechanism which is both simple and workable, on the one hand, and yet which prevents the people who are too clever by half from doing things which are not quite proper even if they are not formally improper.

One ought to say at this stage in regard to building societies that it is a matter which has exercised the public very considerably and which indeed my Department and the other interested Departments of Local Government and Finance are very well aware of in the very recent past. This is the sort of general observation one could apply in very many sectors of our economic life in this country. The vast majority of building societies are behaving responsibly and decently and doing their best within the framework of legislation to carry out the task they were set up to do. In making criticisms—this has been done here and in other places—of particular activities, particular companies and particular societies, that is by implication, we do not want to give the impression that the whole area of building societies is one with which we are deeply dissatisfied or one in which the public should not have considerable confidence. We want the flow of investor's funds to continue inwards so that the flow of building societies' funds can continue outwards. They can then go on providing the finance for a growing number of people to have their homes, whether they be newly-weds or any other section of the community who want to buy houses.

There was a question about section 3 in regard to the nature of the guarantee. I ought to emphasise that the wording in that section is standard formula found in very many Acts. It does not imply an onerous obligation on the State. It implies no obligation at all because it is a guarantee—it is quite distinct from the subsidy given to the building societies—of an arrangement whereby in negotiations between the building societies and the banks they were advanced, not a finite sum of money, but a sum of money on call up to a limit of £6 million. They had a period in which to repay it after a period in which no repayment would be made. It is only in the event of default, which nobody anticipates and nobody is suggesting, that the State would become liable. The advantage of a guarantee, which is an advantage in the end for the desperately hard-pressed consumer of the services of building societies, is that in these circumstances, with the State guaranteeing in the event of a crisis no one anticipates or wishes for, societies can negotiate a little better rate from the bank than they could without the State coming in in the background. Therefore they can pass on, in circumstances where we have desperate worldwide pressures on interest rates, hopefully, a slightly better deal to their users than they could if the State did not offer this encouragement and guarantee.

It is a guarantee. It is not a loan. The details of the facility offered were worked out between the building societies and the banks. It is the sort of thing that has happened in a number of contexts. It is a standard formula and it is found in many Acts in other contexts.

I have tried to deal with the real substance of the matters which Deputies raised and I do not want to stray from this Bill, which, as I say, contains two essential things: (1) facilitating of mergers and (2) a guarantee of a borrowing right negotiated between the different societies and the banks. That is the heart of the Bill. However I should like, in reply to what Deputies have said, to indicate the most profound concern on the part of the Departments involved, primarily Local Government, but I am here as the person responsible for the Register of Friendly Societies and of course the Minister for Finance is involved as well. Indeed, the whole Government are deeply concerned. We have the worldwide circumstance of extremely high interest rates. It is a contribution to inflation in the general sense because people borrowing for the sake of their businesses are paying more for money than is the norm. There is a shortage of capital and it is being bid up. We are part of a larger financial area, the sterling area, which is not just a bigger area than our own economy but is also a very important medium for international exchange as a currency. Therefore the international circumstances in regard to interest rebound on to us very quickly in a way against which it is not easy to insulate ourselves.

There are some advantages for us in this participation of the sterling area but certainly for the ordinary mortgage holder at this time paying the dreadful rate it is very much more than embarrassing. It is a source of anger; it is a source of very understandable irritation. If one looks at the matter of subsidy very large reductions in interest rates by subsidy will swallow immense amounts of money. The amounts one could spend in subsidy in this way are absolutely immense and do not represent a practical course of action. That is not to say that one can do nothing. We have some little gleam of silver on the horizon because of the vigorous action by the British Government who are much more influential than are this Government in regard to sterling interest rates. There has been a little drop in the United Kingdom. At least, the rise has ended. However, one notices that at the same time interest rates in the US, which is by far the larger and more powerful economy, have been increasing but, perhaps, there will be a reduction there, too, and a levelling-off as has been the case in Britain. In the meantime, the Government have provided subsidies of an unprecedented kind in regard to those people who are making repayments to building societies. Dreadful as is the present rate, one can say truthfully that it would be appreciably worse, that it would be worse to the extent of 1¼ per cent, if it were not for the action that this Government have taken but that is not to minimise the difficulties or to say that we should not sympathise with the fury of mortgage holders. It is to say that within the limits possible we have taken action in this direction, and that we hope that the rise has passed. There is evidence to indicate that this is more than a hope.

I shall not say more than that but it is proper for me to express my concern. In this little Bill of two main items we are not trying to avoid discussions. There will be many other opportunities, including the opportunity of discussing the larger Bill, for debate on this issue. I shall leave it at that because it would not be my wish to pre-empt either the area of responsibility of the Minister for Local Government or of any discussion we may have on another occasion in relation to a more comprehensive Bill.

Mr. Brennan

Is the Minister in a position to tell us at what rate the money was borrowed from the Associated Banks and, also, what security was given at that time?

Mr. Keating

As the Deputy may have noticed, I was inquiring as to whether it is proper for me to give that information since this was a negotiation between the building societies and the Associated Banks. I am told that the rating was triple A and that the rate was 12½ per cent. This triple A rating is the rating applied to the best borrower.

Question put and agreed to.

An Ceann Comhairle

Committee Stage?

Mr. Brennan

While it may not be necessary to table amendments to this Bill, a couple of points may come to mind later and for that reason we would prefer, unless the Minister requires the Bill urgently, to defer the Committee Stage.

One point which occurs to me immediately is that the Minister is not making it obligatory on companies to go through the procedure of this Bill in order to merge, in other words, they may merge under the old system and without the Minister's consent or knowledge. Might it not be wise to provide that it be obligatory and that all mergers be subject to section 2? While the Bill purports to improve the procedure, for example, in regard to meetings, it might be possible for a merger to take place without the Minister's consent or, indeed, without reference to this Bill. I was thinking of an amendment on those lines.

Mr. Keating

I shall come to that point in a moment but, first, I would point out that I had hoped this Bill would have been ordered a week ago. The Bill is not one that has been circulated with the minimum of notice. Not for my sake nor for the sake of the House but for the sake of those people who have indicated their wish to go ahead with mergers, I should like to have the next Stage now.

Regarding the point made by Deputy Brennan, it is possible that the existing procedure would be adopted. Of course it would come to the knowledge of the registrar of friendly societies but only after the merger had taken place. The point made by the Deputy is arguable theoretically but in reality the provision in relation to not only three-quarters of a meeting but of two-thirds of all shareholders would be an enormous difficulty so that in practice, provided the new mechanism to be suggested is a great deal easier and, therefore, would be the one of choice, our experience is that existing legislation is holding up mergers that are desirable. Therefore, while the suggestion might have some merit in an abstract sense, I am advised that it is unnecessary and that in practice what we are suggesting is much more attractive.

Mr. Brennan

I was thinking in terms of some of the newly formed societies finding it convenient to merge at some stage without having recourse to this Bill in order to portray a strong front in the face of any disadvantage they might see in any new legislation.

Mr. Keating

The intention was an enabling one. However, if in the short period of time before we get the major Bill it were considered desirable to have an obligatory rather than an enabling mechanism, we could consider such change but my advice is that we should continue as proposed.

Agreed to take remaining Stages today.