I am very grateful to the Government for providing for a matter on the Adjournment a Minister who is appropriate to the subject being discussed. I hope this continues in the future on matters on the Adjournment and on particular Bills. I welcome the Minister, whose brief is Finance to come and talk about a matter which is one for the Department of Finance. I hope the Leader of the House will continue to attract the appropriate Minister to the appropriate matter on the Adjournment.
The reason I have raised this issue is because for a long time we have heard from the Government that it is their intention to create an orderly market in Government stocks and an orderly stock market. Indeed, at stock exchange dinners and on other occasions one has heard the ritual statement from various Ministers for Finance from all parties, that it is their wish to create an orderly stock market in Ireland. It is my contention, because of recent activities in the Government stock market in the marketing of gilt edge stocks in Ireland that that aim is not being fulfilled.
In the past three months there has been virtually a complete closure of the market in Government stocks here. I have here an official list, which will be available to anybody who wants to see it, of the prices on the stock exchange on Tuesday, 15 May. The most striking thing about the market in gilt edge stocks is that not a single one of 47 different stocks of different redemption dates is on offer to the public. Every single one on the list is bid which means that the Government broker, and indirectly the Department of Finance and, therefore, the Government, will take in stock from the Government and from the institutions but they will offer absolutely no stock.
It seems to me that the Government, if they do not have an absolute obligation to offer stock to the public, are creating a false impression if they boast that we have a viable, workable, vibrant, active Government stock market here because nothing could be further from the truth. One of the unfortunate results of this is that small investors — and it is the small investors who suffer here — being unable to buy Government stocks from the Government broker, are advised by their stockbroker, having asked what they should do about it, that the only comparable stocks they can buy with comparable redemption dates and comparable coupons are in the UK.
I would like for a moment to outline for the Minister a typical example of what a man or woman with, say, £10,000 would do if he was looking to invest in Government stock at the moment. He would ring up his stockbroker and he would ask him for a particular stock. For argument's sake, let us say he looked at the 11.5 per cent development 1997-99. His broker would tell him that that stock was not on offer but it was bid and that he could not get the stock for him. He would then tell him that he might be able to get it from another broker or he might be able to get it from his own book if he had a seller but at the moment he might have to wait two, three or four weeks. I spoke to a stockbroker this evening who has had to wait several months in order to invest money for someone in a particular stock. That person has got his money, a small amount, about £12,000, from the redemption of another stock. Having received a cheque from the Government and having had money in Government stocks for a very long time he is now unable to reinvest it in a suitable Government stock for himself. He asks his broker what he should do with his money and he is told, having waited as long as that, the only thing he can do is to go to the UK or to some other comparable stock exchange outside Ireland.
This is unfortunate for two reasons. It is unfortunate because he cannot buy Government stocks in small amounts in the country in which he lives. It is unfortunate as well because the money, as a result, is leaving the country and the Government are not offering him any comparable instruments in which to invest. The other unfortunate area, one which is causing some concern not only to stockbrokers but to small investors as well, is that there is a general feeling abroad that whereas the small investor is being discriminated against, the larger investor, the institution, is getting a better deal from the Government and from the Department. There is a feeling among many stockbrokers that if you are big enough and you have several millions to go in you will be looked after.
I understand that in one recent tranche of Government stock of £30 million the whole lot went straight to large investors. When the tranche was issued the small investor simply was not looked after. He came looking for some of the stock and he was told that that particular stock had bypassed the market, had gone to the institutions and to other people where it was possibly easier for the Government, administratively, to look after.
While we look at this it might be a good thing to look at the whole organisation of Government stocks, not just in the present context where the Government are not making stock available, but at a situation when it was different, when the Government were not making it very easy for people to sell stocks, when they in fact were not taking back their own paper except at prohibitive prices. Whereas now we have a market which is only one-way where you cannot buy in, some years ago I remember very well when foreign investors, especially Germans, were coming here and hoping to put large amounts of money into this country. When they saw the sort of yield they were getting was far more attractive than they could get in Germany, when they saw that the currency risk was very small because we were in the EMS, they decided to invest in Ireland.
In order to invest in this country in a substantial way — for large banks in Germany I am talking about serious amounts of money — they would ask the Government stockbroker or another stockbroker what was the price of a certain stock offered or bid. One of the most embarrassing things for a stockbroker was that while he could quote them guide prices which is from the official list on the Stock Exchange, when the stockbroker actually came to deal in the stock those prices did not hold. It tended to be easier to buy than to sell in substantial amounts of money. There was no quotation ever given in price and size. As is normal on many international stock exchanges, you could never say, "You can buy a million at that price, a million higher up or a million lower." You had to go to the Government broker and say "I want X amount". He would than say "you can have it at this, this and this", whereas you had told the foreign investor that the price was something else.
On the bid side that was even more embarrassing because if he had bought stock he would then come to you several months later and say he wanted to sell stock and ask what would he get for it. You would have to explain to him that you did not know but that if he declared his hand and said exactly how much you would get a bid from the Government broker.
The prices quoted on the official list on the stock exchange are to a large extent irrelevant and the people are dealing in the dark. They simply do not know the sale value of their shares until they actually show them to the Government broker. There were many cases where foreign investors found it very difficult to understand that, having maybe £5 million or £10 million worth of stock, having been quoted a price which was posted on the board in the stock exchange, they were bid three, four or five points down when they offered that stock and they took substantial losses.
I ask the Minister to give us some indication of how the Government intend to conduct an orderly market in Government stocks on the bid, but critically at the moment on the offered side. I anticipate him saying that there is a very healthy secondary market in existence in Government stocks at the moment and he is right in that. The problem is that it is only a matter of matching bargains. It is only a matter of being able to buy when you can sell and when there is a seller at the other side. It means that there is no market in Government stocks being made by the Government broker.
I would like the Minister to consider a solution to this problem. It seems to me that one of the reasons why all these stocks are bid early and why you cannot buy them is that on one level the Minister will say, "We do not want to sell Government stocks and borrow money at rates we cannot afford and, therefore, increase the national debt. At the moment we are in the business of decreasing the national debt." That is a strong and a good argument. I am not really asking the Minister to consider releasing millions and millions of pounds in all 47 stocks on the Irish Stock Exchange. That would be unrealistic, although if he was a good market maker he could probably make money out of doing that by issuing it at lower rates of interest than he should. I am asking the Minister to consider holding his bid prices where they are for large amounts of stock but allowing small amounts of stock every day. It is very frustrating and unforgiveable for the small investors to see institutions dealing in large amounts between themselves and yet they come looking for small amounts of stock which had been redeemed out of Government stocks already they cannot do it. I know that not only the small stockbroker but the small investor feels he is being discriminated against.
I ask the Minister to consider giving the Government broker some discretion every day by saying: `You can let out small amounts of, say, £25,000, £10,000 per time, in order to look after the small investor if you take stock in" At the moment a very bad taste is left in the mouth of the Irish investor when a very small amount of stock would actually solve that problem. I have received complaints from stockbrokers across the board and from investors about the present situation where they simply cannot get hold of stock and a real market is not actually being enacted by the Government.
