Would it be in order to move the remaining outstanding Votes and speak on them together?
Vote 2: Houses of the Oireachtas.
If the Opposition are agreeable, I think so. The position is that there can be only one motion before the House at one time but we can move one and speak on them all and we can move them all together afterwards, if the Opposition are agreeable.
And if the Minister identifies the motion on which he is speaking.
He will move Vote 2 and speak on the other eight.
I move:
That a supplementary sum not exceeding £132,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December, 1977, for the salaries and expenses of the Houses of the Oireachtas, including certain grants-in-aid.
As has been the case in former years, a special Supplementary Estimate for remuneration is necessary. This is to cover the cost of pay increases during the year on eight Votes. On other Votes, the cost of the increases is being met from savings on the individual Votes or has been included in Supplementary Estimates on the individual Votes which are required for other reasons. The amount sought for the special Remuneration Vote is £4,639,400.
On the Vote for Superannuation and Retired Allowances an additional £850,000 is being sought for the impact of increases under the national pay agreement, 1977, for improved ex-gratia pensions for widows of public servants, and for increased expenditure on the non-established pension scheme.
The Supplementary Estimate for Miscellaneous Expenses includes a sum of £1.8 million in respect of recoupment to the Central Bank of moneys advanced to the official liquidator of Irish Trust Bank Limited to enable him to make full repayment to depositors.
This expenditure arises from the arrangements made to give effect to the decision that depositors in Irish Trust Bank should be repaid speedily and in full. At my request, which the Government endorsed, the Central Bank agreed to provide the necessary funds on the understanding that, subject to the approval of the House, any expenditure over and above the cost of the limited measures which the Central Bank were prepared to implement would be recouped by the Exchequer as soon as possible. I am gratified that the bank agreed to this course of action, which was the only way in which payment could be effected expeditiously. After allowing for distributions made by the liquidator and the exclusion of certain depositors, the total amount to be provided by the Central Bank in the current year is estimated at £2.76 million. Approximately £960,000 is payable by the Central Bank, leaving a balance of £1.8 million to be recouped by the Exchequer.
The facts of the case are fairly widely known but it may be helpful to recount briefly, for the benefit of Deputies, the factors which lead the Government to decide on full payment. Firstly, this was the first case of a bank failure since the introduction of the new licensing and supervisory arrangements under the Central Bank Act, 1971. It became apparent that, rightly or wrongly, there was a widespread belief that having licensed a bank the authorities would stand behind it. It is only right to point out that this view would have been strengthened by the measures taken by the authorities elsewhere in recent years to safeguard the interests of depositors with banks in difficulty, although the problems were rather different in scale. Secondly, there were a substantial number of small depositors involved who faced heavy losses and many of whom were already experiencing hardship. Thirdly, the Government were satisfied that generous action in this case would reinforce the high standing of our financial institutions and would go far to obviate any danger that our efforts to attract overseas investment would be adversely affected.
Few people would dispute the principle of extending aid in this instance. There are arguments for limiting such aid. They were put to me strongly by the Central Bank. I respect these views and accept their validity. But in the particular circumstances of this case, as I have outlined them to the House, and in the absence of standing arrangements to deal with the problem, I am satisfied that the decision to make full repayment was the correct one. But let me make it quite clear that this is "the exception that proves the rule". It is not the intention to underwrite bad or imprudent management or to cover investors whose greed for large returns outruns their discretion. The Irish Trust Bank case has revealed some weaknesses in supervisory powers. Amending legislation to close these loopholes will be brought forward as soon as possible. It is my intention to provide for limited relief for depositors where there is no option but to allow a bank to fail. The scheme, which I hope it will never be necessary to implement, will be in line with modern thinking in other countries and in the European Community. That is as far as I intend to go and I want that message to be heard and taken to heart by all concerned.
For the information of the House I would add that in addition to the sum now required a further provision of around £100,000 will have to be made in the Estimates for 1978 in respect of payments on foot of claims, which have not yet been cleared by the court examiner. The delay in these cases is not exceptional.
I wish to place on record my appreciation of the assistance and co-operation afforded to my Department by the staff of the Central Bank and by the official liquidator and his staff, as a result of which the payments were made smoothly and successfully.
The present Estimate before the House is for the purpose of recouping to the Central Bank the additional cost incurred by them in the current financial year in providing funds for the repayment in full of Irish Trust Bank depositors. The amount required is £1.8 million.
On the Vote for the Houses of the Oireachtas, £132,000 is sought mainly to cover the cost of increases during the year in accordance with the national pay agreement in allowances of Deputies and Senators and increases in their motor mileage rates and overnight allowances.
There are also Supplementary Estimates for the Office of the Minister for Finance, mainly covering pay increases, increased expenditure on office machinery and on management of Government stocks; for the Office of the Attorney General, because of a higher incidence of legal costs; for the Office of the Director of Public Prosecutions, mainly for increased expenditure on fees to counsel; and a token estimate for the Office of the Minister for the Public Service. This is for the Institute of Public Administration.
There is also an excess Vote for Superannuation and Retired Allowances relating to 1975.
I commend these Estimates to the House.
Vote No. 14 is the one on which I want to speak mainly. The Minister said:
But let me make it quite clear that this is "the exception that proves the rule". It is not the intention to underwrite bad or imprudent management or to cover investors whose greed for large returns outruns their discretion.
That is exactly what we are doing. The Minister knows it is nonsense to say that this is the exception that proves the rule. Every time the Fianna Fáil Party in particular—maybe other parties will succumb to the same weakness when this precedent is shown to them—coming up to an election are faced with a similar set of circumstances they will do the same thing because the finger will always be pointed backwards at the Irish Trust Bank which a political party undertook in the heat of an election campaign to bail out and then put the bill on the taxpayer.
The total bill goes on the taxpayer even though the Minister referred to a sum of approximately £100,000 next year. He does not say if that is just from the Exchequer or from the Central Bank. It has been the practice in the Central Bank to refund to the Exchequer from time to time the profits they make. They will be light by the sum the Minister refers to in future years. It is just not the £1,800,000 plus the £100,000 in 1978 that the taxpayers will be liable for. They will be liable for the full amount even though liable for only £1,900,000 directly now and next year.
We are talking about a principle here. Any Government or any political party who have any respect for the financial institutions constantly exhort the public to invest in their own savings schemes, the Post Office, the ICC and the ACC. Any Government or any Department who have the slightest respect for these institutions would not dream of doing what is being done here. How can one answer some person of limited means who invests £1,000 in the Post Office at 6 per cent, or whatever the rate is, who comes to you and says: "Was I not a bloody fool that I did not put it in the Irish Trust Bank at 18 per cent and you would bail me out?"
Thousands of genuine people invested in this Bank. The vast number of the people who invested in it are absolutely above reproach. They were tempted by a high rate of interest into putting their money into the Irish Trust Bank. Some of them were possibly under the impression that it was guaranteed by the State. It is difficult to see why the State should guarantee the ACC, the ICC and other institutions at a rate of interest sometimes 8 per cent lower than this bank were offering. How could anybody be foolish enough to think the State would be in competition with itself and guarantee itself against itself as in this case? The Minister knows that a lot of the depositors in this bank are fictitious.
I do not know that.
The Minister can check it.
I hope the Deputy will tell us a little more.
I will if the Minister gives me a chance. There are people with deposits in this bank who have pretty common Irish names, like Barry, Kelly and Murphy, with addresses in legitimate streets but the numbers in those streets do not correspond with the numbers given. I will give an example of a depositor named Mr. Barry in 119 Kildare Street. There is a name Barry and there is a legitimate street but the number is fictitious. There can also be a Father O'Callaghan of the Catholic Church c/o the bank and an attachment: "do not forward correspondence". There are many people of that nature. My information is that the £960,000 covers depositors up to £15,000 and what is being voted here tonight is to cover depositors with more than £15,000. Is that not correct?
No.
I was not sure of that point. I believe that there are six or seven depositors with more than £60,000 and that £1,000,000 of this money will be divided between approximately 22 people. Is that correct?
I suggest the Deputy make his statement and not proceed by way of questions.
I am asking the Minister questions but I do not expect him to answer them immediately. The Minister can answer when he is replying. I regret having to say this and it is important that the Minister reply carefully to it. I want an assurance that no member of the Government or any connection of his will benefit by this money.
Would Deputy Barry please be quite specific? Let us have no running around in circles. Let us get it on the record what the Deputy is saying.
If the Minister will give me that assurance I will accept his word.
I want to know precisely what Deputy Barry is suggesting and I will deal with it. I will agree or refute it but I cannot if they are just innuendoes.
This is not an innuendo.
From the point of view of the Chair, Deputy Barry should certainly not make charges against people outside the House. He can make them against people within the House who have the right and are here to defend themselves.
I have not made a charge against anybody specifically. I would like an assurance from the Minister on the lines I suggested.
The Deputy mentioned relatives of Ministers and things like that.
I mentioned connections.
That could be very serious.
I am not accustomed to making charges of this kind in the House.
I wonder who put the Deputy up to this one?
If there is no truth in this allegation in fairness to the Minister's Government and members of that Government the Minister should refute it. There is no statutory basis, as far as I have been informed, for the payment of this money. Deputy de Valera frequently, while he was chairman of the Committee of Public Accounts, drew attention—I suspect that we have possibly been guilty of this and possibly this is not the only case of this—to money being voted here without statutory backing. I do not notice in the Minister's speech any suggestion that he intends introducing such legislation. He stated:
The scheme, which I hope it will never be necessary to implement, will be in line with modern thinking in other countries and in the European Community.
My knowledge is that what is done in other countries is that either the Central Bank, if such it is called, or the corresponding institution in that country, forms a fund with the ordinary commercial bank and the other banks that come under it. They set up a fund out of which moneys in cases like this, are paid and the Exchequer does not finance it. If the Minister can quote an example of where an Exchequer intervenes directly in such a situation, I should be glad to hear it. The Minister says that the Irish Trust Bank case has revealed some weaknesses in supervisory powers and that amending legislation to close the loopholes will be brought forward as soon as possible. It is his intention, he says, to provide for limited relief for depositors where there is no option but to allow the bank to fail. Under what Act is this money being paid out? If I am reading the Minister's speech correctly it is not intended that the legislation being introduced will provide for the paying out of this money but that it will close loopholes exposed by the failure of the Irish Trust Bank.
That is correct.
But there is no legislation to cover the paying out of this money.
That is correct.
Will there be legislation for this purpose?
I will deal with that point when replying.
I hold no grudge against those people who have got their money out of the Irish Trust Bank as a result of this Vote. They took a risk, but the venture was not successful. Consequently, they hit a weak political party at a fortuitous time politically, engaged in a bit of arm-twisting which resulted in that party making a foolish promise for which the taxpayer will have to foot the bill. That is the £1.8 million we are voting this evening.
The first point I wish to make, lest I overlook it later, relates to an interjection in which I said something to Deputy Barry which indicated that the purpose of this Vote was not merely to repay depositors of more than £15,000. What I said was correct but I think I know what the Deputy had in mind, that was, that the Central Bank's original proposal was to refund a certain amount in respect of deposits up to £15,000.
That would have been covered by the £960,000.
Yes. It is that amount that is coming from the Central Bank and this Vote is required to make up the difference, the total amount being in respect of total recoupment for all depositors other than connected depositors and, as I have indicated a small amount where claims have yet to be made or processed.
The point I made is correct, that is, that the £960,000 will pay depositors who invested up to £15,000 while the £1.8 million is to pay those whose investments were greater than £15,000.
That is not correct. The Central Bank's proposal was in respect of deposits up to £15,000, but it was intended to pay a sum of 29p in the £ which was the estimated amount at that time that the liquidator would recover over and above the amount already realised. Therefore, this amount would not have recompensed in full any depositor.
If the liquidator could recover it there would be no necessity for the 29p to be paid by the Central Bank. The liquidator would achieve that.
Eventually—perhaps during a period of five, six or more years.
Perhaps I am dense about this——
The Minister is concluding.
It is important that we be clear on this question. The £960,000 makes up the difference between the 29p which the liquidator will collect and the £1 for those depositors who invested up to £15,000.
That is not correct either.
The Minister to conclude without interruption.
This is complex but I think that if the Deputy refers to the record of the debate he will find what is the precise position. It is becoming more complicated because the liquidator's estimate has changed. However, if, after perusing the record, the Deputy is not sure about the position, I shall be glad to give him any details he seeks.
There is one other question.
Just one more question.
The liquidator's original estimate was for 29p in the £ to be paid to all depositors, regardless of the amount they invested.
It would have provided for that.
Let us assume that the 29p is correct. What, then, will the £960,000 be used for?
We cannot continue on these lines.
I have tried to indicate that the Central Bank's original proposal was to pay a sum of money which would have been recouped to them eventually by the liquidator. The bank's proposal was confined to depositors of up to £15,000 but would not have recompensed in full those depositors. Deputy Barry began by quoting what I have said concerning this being the exception that proved the rule and he said it is not the exception. Let me remind the Deputy of something he may have overlooked: this is the first time that a bank licensed by the Central Bank has failed. Arising out of that failure certain weaknesses have been disclosed in our statutory provisions for supervision. If we had never had the kind of provision that is in this Supplementary Estimate we would still have had to take some action to deal with this matter.
As I have indicated both this evening and previously, I propose to bring in legislation that will provide for some form of protection for depositors of licensed banks lest any such bank should fail in the future, although I trust there will be no such failure. However, we propose to provide some form of protection to cover such event. I have tried to make it clear in the past and again this evening that that form of protection will not amount to full recompense for any depositor in a licensed bank. It is very easy now to say we should not do that. I understood Deputy Barry to say that we should not make provision for any recompense for a depositor who had invested in a failed bank. I do not know whether that was what the Deputy intended to convey, but it is not a proposition I accept. Neither is it a proposition accepted by the Central Bank. We are doing something about that. However, there is validity in the argument that recompense should not be given in full lest it might encourage people either to be careless or imprudent in their management of banks or to encourage the depositors to invest money in banks paying rates of interest that are too high.
That is all very well as far as the future is concerned and what we do about it, but what we are dealing with here is the first and only case that has come up. There is a good deal of evidence to show that many of the depositors honestly and genuinely believed that this bank had the full support of the Irish Government and of the Central Bank. We know that belief was wrong and not well-founded, but that does not say it was not a genuine belief. I am satisfied that in quite a number of cases it was genuine. I am also satisfied that there were cases of particular hardship involved. In fairness, Deputy Barry did not suggest this, but attempts have been made to suggest that what is involved here is a group of wealthy speculators to whom money is being paid out now by the taxpayers.
Before Fianna Fáil gave its commitment in this regard I received representations from a number of sources at home and abroad and I believe it might be no harm to outline a few of the cases. Deputy Barry Desmond unfortunately is not here for this discussion although he was very vocal on this topic before. I wonder what his reaction to these cases would be. One case is where a group of men in this city were made redundant and they invested their redundancy lump sums with the Irish Trust Bank expecting that it would bring them a small additional yearly income. When the bank collapsed they lost not only the income but their redundancy lump sums. Most of them were in their late fifties and had no hope of getting other jobs. Does Deputy Desmond think that this sum we are asking the House to vote in that case is being paid out to a bunch of wealthy speculators? Another case on which I received representations was where an industrial worker in the west of Ireland who was maimed for life as a result of an accident at his job was awarded compensation for his injuries in the courts and invested the entire amount in the Irish Trust Bank. If we had not done what we have, that man would have been left with something in the region of 30p in the £ to date. An Irish-American couple who were living in New York had invested their life savings with the Irish Trust Bank because they planned to spend their retirement in Ireland. They thought that the Irish Trust Bank being licensed by the Central Bank was one that would ensure their money was safe and suddenly they found themselves facing their retirement without a penny. Another Irish-American who emigrated in the fifties had worked hard and saved his money, planned to come back home and start a job in Ireland. He was in the process of building a house when the trust bank closed down.
I mention these cases to make it clear that while they are not representative of all the depositors they are very representative of the great majority. These are not the kind of people that we are told are benefiting from this payment. Most of these are small people who are ruined unless this is done. One can be tough about it and say "that is too bad, but they should not have invested their money unwisely". Many people I know have to suffer if they invest unwisely, but quite clearly a lot of these depositors were not skilled investors; they had no skill at all in this area and they believed that this bank, being licensed by the Central Bank had the backing of the Irish Government and the Irish State.
Deputy Barry asked for a breakdown of the depositors. As accurately as I can get it, it is of the following order; between £0 and £1,000 the number of depositors was 574, between £1,001 and £5,000 the number was 367, between £5,001 and £10,000 the number was 123, between £10,001 and £15,000 the number was 54 and £15,000 plus the number was 45. It will be clear from this that over 80 per cent of the depositors were people who had investments or deposits in the range between £0 and £5,000.
But not over 80 per cent of the money goes to them.
No, of course not. There were, as we can see from the figures given, some relatively large depositors. What is to be said? Are we to say that they are not to be compensated, that only the smaller people are to be compensated although possibly some of the smaller deposits, for all I know, were large deposits divided up?
I thought it was the original intention that depositors with investments of over £15,000 would not get anything. That could never be because they always get what the liquidator would recover.
That was never part of our proposal. Deputy Barry has not grasped the significance of the fact that this was the first and only licensed bank which collapsed here. Does the Deputy realise the impact that this made? Did the Deputy hear anything about the kind of reaction there was, for instance, in parts of the United States to some of our efforts to attract industrial investment as a result of the collapse of the Irish Trust Bank?
I know some of the investors here.
I imagine Deputy Barry may know something about the reaction and what was happening to some of our IDA efforts in America as a result of this collapse and the statement that the Government had no responsibility and would not accept responsibility. We had to consider the effect on our efforts at industrial promotion, and in the long run, perhaps most importantly, the record of our financial institutions given that this was a licensed bank. This all happened in the context of banks in other countries having collapsed and having being bailed out. Deputy Barry made the point that he did not think that this was done by the exchequers but by the body corresponding to our Central Bank in other countries. The Deputy also made the point earlier in his speech that he really did not think there was any difference in the source and that ultimately the money came from the Exchequer. That is true in so far as any profits made by the Central Bank accrue to the Exchequer in the long run.
Deputy Barry says there were fictitious names or addresses or both in this case. Maybe he has more information than I have on this. Speaking from recollection, the only information I have which would bear on this matter is in part of a police report on the New York area, which was obtained by the previous Government and known to the previous Government before they left office some months before, a police report which showed that there was no evidence whatever to support any suggestion that depositors in the Irish Trust Bank were themselves in or were fronts for subversive groups. The fact that that report was available did not prevent colleagues of Deputy Barry who saw the reports and who should have known better pretending to the Irish public that there was some evidence in that regard. The only reference that I saw was in one case where it appeared that the address given was not accurate; there are not a corresponding number in the street in question, as Deputy Barry said, but it appeared in the report that the person concerned was identified by the police and there was no evidence whatever of any criminal or subversive intent on the part of that person.
Deputy Barry also put forward an innuendo—this is not his normal form and I regret that somebody persuaded him to do that; of course it is his right and duty if he has the evidence to support the innuendo to put the whole case before the House, but he did not. What he did was to ask me to deny that any member of the Government or a connection of a Member of the Government had money in the Irish Trust Bank. Deputy Barry should know, if he does not, that the list of depositors in the Irish Trust Bank is not available to me. It is available in the Central Bank who are legally prohibited from making it available to anybody else. It is available to the Official Liquidator who cannot make it available without an order of the High Court. Therefore Deputy Barry knows I cannot say positively that no member of the Irish Government or a connection of a member of the Government is on that list. Of course I cannot. I have not seen the list. I suggest that this is an unfair and disreputable tactic. If Deputy Barry has evidence to support that contention he should say so and tell us what the evidence is, but if he has not he is putting the old question, have I stopped beating my wife? I think whatever I say he is going to say, "You did not deny it". He knows I cannot deny it because I have not the evidence. Has Deputy Barry any evidence to support it? If he has why did he not put it on the record of this House? These tactics in the end do not redound to the credit of those who engage in them, and I trust that Deputy Barry will not in future allow himself to be talked into this kind of tactic by anybody else.
Deputy Barry asked whether there was any legislation authorising this payment and I indicated in an interjection that there was not. He may misunderstand the position. It is true that I referred to legislation to be brought in and, as he correctly said, I said this would relate only to the future, to tightening regulations and to providing a limited scheme of compensation if any such case should arise, but it does not relate to this case. I think he misunderstood the position with regard to authority for payment of this. The authority for payment of this is obtained from Dáil Éireann and that is what we are seeking now. If Dáil Éireann give that authority it is open to the Dáil to give it without legislation, so that legislation as such is not necessary. I think he misunderstood Deputy de Valera's crusade as Chairman of the Committee of Public Accounts which was for payment of moneys where there was statutory authority but payment in excess of the statutory authority, and therefore there was not authority other than a vote of the Dáil on the Appropriation Account. That is a complicated exercise and Deputy Barry may be conscious of it because it arose in connection with the Department of Transport and Power.
With CIE.
The situation there is quite different from the one here, and this House can, and I hope will, provide the authority for the payment of this sum without legislation.
I stress again that I believe the decision in this case was the right one, having regard to the hardship involved, the reputation of Irish financial institutions, the actual and much greater potential damage to our efforts in industrial promotion abroad, and above all the fact that all of this arose out of the first and I hope only failure by a licensed Irish bank. I believe we were right to do it but I want to stress that, having done it and in the circumstances I have described, we in this party have no intention—Deputy Barry may say that other political parties may do this in the future; if they do they can answer for it—if any such case should arise in the future, of providing anything more by way of compensation than will be provided for in the legislation we intend to introduce. It will not be full compensation. I want to make that perfectly clear.
In spite of hardship cases?
In spite of hardship cases, because we have given due warning, and the mere existence of this Irish Trust Bank case should be ample warning to anybody concerned with investing money in banks that they have to be careful in investing money and that the Government do not guarantee deposits in banks which are licensed with the Central Bank. There can be few people now who are not aware of that fact. I believe the decision in this case was the right one and I ask the House to give the necessary authority for payment of this money by way of recoupment to the Central Bank.
Vote put and agreed to.