Dáil Éireann - Volume 321 - 21 May, 1980

Ceisteanna—Questions. Oral Answers. - Aids for Industry and Agriculture.

7. Mr. Enright asked the Minister for Finance the steps, if any, being taken to help Irish industry and agriculture to overcome the difficulties they are facing at present due to current bank interest rates.

Mr. O'Kennedy: I have pointed out on previous occasions recently in the House that substantial aids are being provided for industry and agriculture. I have no further steps in mind. As I said in my reply to a question on 1 May, the Exchequer is not in a position to entertain such proposals.

Mr. Enright: Is the Minister in a position to let the House know if the Government have examined the position in regard to the high bank interest rates which the Minister for Industry, Commerce and Tourism promised would take place in the coming week when he mentioned this at the Fianna Fáil Youth Conference on 13 April?

Mr. O'Kennedy: Not only have the Government examined the question of high bank interest rates but we have played a very active role in getting to the [234] root cause of the international high interest rates in consultations which I have had at Finance Ministers level in the EEC, at the IMF in Hamburg and elsewhere. These consultations will be continued in the course of my discussions with these Ministers at a meeting in Brussels this coming week. We hope that we may see a move towards a lowering of the international interest rates. However, until such time as that emerges I do not want to hold out any undue hope.

Mr. Enright: Is the Minister aware that the Minister for Industry, Commerce and Tourism here in the House on a debate on bank interest rates went on to outline that a number of firms were hanging on by the skin of their teeth and the increase in the bank interest rates would mean the difference between survival and disappearance with significant job losses for a lot of these firms, and that the Government in the meantime have not done anything about this in that there have not been any additional aids or remedies or anything else provided by the Government?

Mr. O'Kennedy: No. If the Deputy wants to refer questions to the Minister for Industry, Commerce and Tourism he should do that. As far as the aids provided by the Government are concerned, the Deputy will be aware from a previous question on this topic a few weeks ago that I indicated that the Government are providing exchange risk guarantee through the ACC for farming and through the ICC for industry and this has been of very considerable assistance. That seems to contradict the Deputy when he said we did not do anything. I assure the Deputy that across the whole range of these activities the impact of this unwelcome development internationally is something that we are endeavouring to cushion, taking account of our responsibility to the taxpayer generally. Otherwise the easy and immediate answer would be to subsidise in every event and to call on the taxpayer to pay more and more. I am not prepared to do that.

[235] Mr. P. Barry: Does the Minister agree that the high interest rates are damaging the prospects for expansion of industry?

Mr. O'Kennedy: Of course I do.

Mr. P. Barry: There is no risk to the Government as long as their currency remains within the bands of the EMS if they accept the exchange risks. Is that correct?

Mr. O'Kennedy: Does the Deputy want a reply to the question?

Mr. P. Barry: Yes.

Mr. O'Kennedy: In view of the stability of our currency within the EMS——

Mr. Harte: The what?

Mr. O'Kennedy: The stability of our currency within the EMS, and it has been very stable at the centre of the band. The exchange risk for either industry or agriculture is not at all as was apprehended it might be. As I have said already, they should be encouraged to take up the sources of credit that are available in the normal course and I will encourage them to do so and that would act not only in ease of themselves but also in ease of the management of public finances, which is a matter of some concern at this stage.

Mr. P. Barry: Will the Minister agree that there is no risk for industry borrowing abroad in the exchange fluctuations and there is no risk for the Government either and this is one of the themes that will give this guarantee by the Government and will give them the courage to go into the markets of Europe and borrow money if they are assured there is no exchange risk? Is it not well worth while for the Minister on the Government's behalf to take that risk on behalf of industry?

Mr. O'Kennedy: One could have a debate on this, subject to the ruling of the Ceann Comhairle. I did not say that [236] there is no risk. I said that events have proved——

Mr. P. Barry: Minimal risk.

Mr. O'Kennedy: Minimal risk, if any risk. Secondly, to introduce this as being a general principle that the Government should subsidise against the impact of these events when other Governments are not doing so would be something that in responsibility I could not do. The industries themselves should engage in a practice which, understandably, has not been their practice, tied as they were more or less to one market, of looking to other markets particularly in Europe and elsewhere, and they will find that not only are the sources of credit there but they are at competitive rates which will be in their interests and the interests of the economy.

Mr. P. Barry: The Minister has bad advice on this and he should not take it.

Mr. Bruton: Will the Minister agree that the chief reason for the high rate of interest here is the relatively high rate of inflation here vis-à-vis the other countries, which is a matter of Government policy?

Mr. O'Kennedy: I did not quite hear what the Deputy said.

Mr. Bruton: Would the Minister not agree that the chief reason for the high rate of interest here is the relatively high rate of inflation in this country vis-à-vis other countries, which is a matter of Government policy? Secondly, would he agree further that the restriction of credit in this country can be traced directly to excessive Government borrowing which has tended to mop up available finance for Government purposes, thereby starving the private sector, industry and agriculture?

An Ceann Comhairle: That is a separate question.

Mr. O'Kennedy: In view of the manner in which the Deputy has expressed [237] the question, I want to answer. Of course the high rate of inflation is not a matter of Government policy. Secondly, the interest rates here——

(Interruptions.)

Mr. O'Kennedy: I understood the Deputy to say that it was a matter of Government policy. The second point is that the interest rates here are not unduly high, having regard to the inflation rates in other countries. Inflation rates in other countries by comparison with experiences of some years ago—as Deputies across the way will be aware particularly—were very much higher in proportion to ours than they are now. As far as interest rates are concerned—the leader of the Opposition raised this question previously—in real terms, not just proportionate terms, since June of last year the increase in interest rates has been lower in this country than in any of our partners in the EEC. I am not talking in proportionate terms, I am saying that in real terms it is very much higher.

Mr. P. Barry: That did not save anybody's job.

Mr. O'Kennedy: I want to get some points of fact on the record.

Mr. P. Barry: The Minister should not be juggling with the facts.

Mr. O'Kennedy: If that is juggling it is in reply to an issue raised here before my time.

Mr. P. Barry: He is trying to get out of this House with as little embarrassment as possible and he is not saving jobs.

Mr. Harte: The Minister talks about the stability of the currency within the EMS and I acknowledge that. However, does he appreciate that farmers and people involved in industry in Border areas who have their banking accounts in Northern Ireland and who were forced [238] to bring their banking accounts into the Republic were forced to increase their overdrafts. In other words, if they had an overdraft of £100,000 in Northern Ireland they needed £112,000 or £110,000 to discharge that amount by using the punt as against sterling. This forced the farmers in Border areas and those involved in industry there to pay a higher interest rate on the increased overdraft. The Fianna Fáil Government forced them to do this. Does the Minister consider that the advantages within the EMS outweigh the advantages of Irish unity?

An Ceann Comhairle: That is a separate question. We are still on Question No. 7.

Mr. Harte: It arises out of the Minister's reply. It is not a separate question.

An Ceann Comhairle: The Minister may reply if he wishes but it has nothing to do with Question No. 7.

Mr. O'Kennedy: I cannot see how it is related directly to interest rates.

Mr. Harte: This is a very real issue in Border areas.

Mr. O'Kennedy: I did not suggest that it is not but I do not see how it is related to this question.

(Interruptions.)

Mr. Enright: The Minister said that aids were available in regard to the ACC and the ICC as regards borrowing and so on. Would he outline what additional aid or assistance is available for people who borrow since the increases in bank interest rates? Has there been additional aid or assistance for these people who are borrowing?

Mr. O'Kennedy: Yes, and the details in each case are a matter for both those organisations. Up to 50 million exchange cover has been provided by the Government for both of these organisations.

[239] How it is applied in each case is a matter for them and the Deputy can get the details from them. I can furnish him with some of them, but it is a matter of considerable detail.

An Ceann Comhairle: Question No. 8 is for written reply.