MIONTUAIRISCÍ NA FIANAISE
MINUTES OF EVIDENCE
Déardaoin 15 Iúil, 1971.
Thursday, 15th July, 1971.
The Committee met at 11 a.m.
DEPUTY P. HOGAN in the chair.
Mr. E. F. Suttle (An tArd-Reachtaire Cuntas agus Ciste) called and examined.
Mr. C. H. Murray called and examined.
1. Chairman.—Paragraph 10 of the Report of the Comptroller and Auditor General reads as follows:
“10. The proceeds of the 100 million Deutschemark Bearer Bonds Loan raised abroad in the year were placed on deposit in a German Bank from 15th September to 20th November, 1969 and then converted and transferred to the Central Fund together with interest amounting to £114,542 which is accounted for in Sundry Receipts. I expressed the view that the terms of section 4 of the Appropriation Act, 1965 which then governed the borrowing required that conversion into Irish currency should have been effected immediately. Section 2 of the Appropriation Act, 1969 (enacted in December, 1969) amended the 1965 Act with retrospective effect and enabled the Minister for Finance to effect the conversion of any borrowing forthwith, or at any time within one year, and, pending conversion, to place the sum borrowed on deposit outside the State. I have noted that a further loan of 15 million dollars was raised on the Eurobond market in March, 1970. The proceeds were placed on deposit in a New York bank from 11th March to 14th April, 1970 and then converted and transferred, with interest of £53,482, to the Central Fund.”
Mr. Suttle.—This is a difficult question. As you can see in the paragraph, this was a loan raised in Germany around September 1969. The Minister for Finance decided to leave the money in Germany and at that stage I think there was a question of raising the value of the Deutschemark and he only brought the money back to the Exchequer in November, 1969. I was consulted at the time and I said that I did not think that he had authority under legislation to do that so he subsequently brought in legislation into the Dáil to give him authority but I personally think that legislation is unconstitutional because the Constitution lays down that all moneys should go into the Exchequer and form one fund. This money was raised in Germany and did not come into the Exchequer until two months later. I personally think that the legislation is bad. One of the difficulties in the position is that I have a constitutional duty to control the Exchequer. The Minister for Finance, if he wants money out of the Exchequer, has to apply to me for a credit on the Exchequer and I will only issue that to him when I am assured that he has the authority of the Dáil, to draw such money. When he raised this loan in Germany and left it there and did not bring it into the Exchequer, it was completely outside my control. It was completely under the personal control of the Minister and I think, constitutionally, that is wrong, even though, as I say, he brought in the legislation and it was passed by Dáil Éireann to authorise him to do this.
2. Chairman.—Does Mr. Murray wish to make any comment on that?
Mr. Murray.—Except one of surprise, Chairman. To my knowledge, the constitutionality of the legislation to which the Comptroller and Auditor General referred has not been raised with my Department. I may be wrong in that but it is news to me. I think that it is as well to be very clear on what was at issue here. This was a very exceptional arrangement, a very exceptional position. Normally, moneys raised by borrowing are credited to the Exchequer straight away but in this particular instance there was every reason to believe at the time we were borrowing that there was a very good prospect that the Deutschemark was going to be revalued. It was not convenient for us nor was it appropriate for us to delay the borrowing so what we did was to arrange that the moneys, the proceeds of the borrowing, would be held abroad in Deutschemarks so that in due course, after a very short interval when our expectations were proved right and there was a revaluation, these Deutschemarks were more valuable in Irish pounds than they would otherwise have been. The fact that in these exceptional circumstances we delayed crediting the proceeds to the Exchequer straight away meant that the Irish pound value of this borrowing was almost £750,000 more than it would have been had we credited the proceeds straight away.
3. Chairman.—On that occasion we backed a winner. But could it not happen that we could have backed a loser?—We could not have lost. There was no question of a devaluation of the Deutschemark on that particular occasion.
Mr. Suttle.—I am afraid, Mr. Murray, it is not entirely exceptional because, as you can see from the last sentence in that paragraph, there was another loan raised in Eurodollars in March of 1970 and it was not brought back until April, 1970. In that case there was no question of a revaluation of the Eurodollar. There is another aspect of that too. That money was never brought to account in the Exchequer and the Finance Accounts published by your Department purporting to represent the Exchequer make no reference to that money even though it was there at 31st March and these accounts show your balances at 31st March and do not make any reference to them. That is a further loan. I think the whole thing is wrong constitutionally. There was nothing to prevent legislation being passed to enable those Deutschemarks in September to be credited to the Exchequer at that stage and left in Germany. That could be done quite easily. Actually, in the case of the second loan the only way we became aware of it at 31st March was that we saw that you had deposited the money with the Central Bank here. That was the only reason we became aware of it because we were doing the Central Bank accounts and came across this Eurodollar loan which the Department of Finance had loaned to the Central Bank.
Mr. Murray.—My earlier remarks were related specifically to the circumstances in which we left the proceeds of this Deutschemark borrowing on the Continent for a limited period of time. I mentioned the profit— because that is, in effect, what it was—which accrued to the Exchequer as a result of that. I mentioned that as a matter which I thought might be of some interest to this Committee. My remarks did not relate at all to the subsequent Euro-bond borrowing. The delay in that was covered, as far as we were concerned, by the specific terms of section 2 of the Appropriation Act, 1969, whose constitutionality is not in doubt as far as my Department is concerned.
Mr. Suttle.—My view is that under the Constitution I am required to control issues from the Exchequer and while these moneys lie out of the Exchequer they are completely outside my control and they are in the personal control of the Minister for Finance. I do not think that is right constitutionally. No money should be available to the Executive Government outside the Exchequer control. I consider the legislation passed in November was unconstitutional.—I do not propose on this occasion—I am not equipped to and I do not propose—to argue the constitutionality of this Act.
Chairman.—It is a very important matter.
4. Deputy H. Gibbons.—One point strikes me in this question of borrowing. How does it apply then to our own internal loans whereby the person lending the money to the State pays this firstly into one of the banks in the past— I understand in the future it goes into the Central Bank—would this not be more or less analagous to borrowing money in Germany and leaving it there for a time? In other words, those who lend money to the State through loans, for some period of time it is with the banks before it reaches the Exchequer. Is there any analogy? Would anybody like to comment on that?
Mr. Suttle.—There is no comparison there. The moneys raised on home loans goes direct into the Exchequer. There may be a question of the time between application for loans and the actual entry into the Exchequer is just normal banking arrangements which would apply to anything. There is no delay there. Actually, the money goes directly into the Exchequer in the case of internal loans.
5. Deputy Treacy.—May I ask what steps he took at that time to bring to the notice of the proper authorities his feelings in this matter concerning the lack of constitutionality in the transaction and, if so, with what result?
Mr. Suttle.—I did not raise this matter officially with the Department of Finance because I felt it was not a matter to take up with the Department of Finance but a matter to be taken up with Dáil Éireann. Dáil Éireann themselves passed this legislation without considering the question of the constitutionality of it. As I say, the Minister for Finance was practically complimented on making the profit.
6. Deputy Treacy.—Where you are at variance with the Department of Finance in a matter of this kind, what steps are open to you to speedily rectify it? To whom do you refer?
Mr. Suttle.—By reporting the matter as I have done now. I have put in this paragraph——
7. Deputy Treacy.—A considerable time afterwards.
Mr. Suttle.—and the feeling I have now is that it is up to the Committee to decide what view they take of the matter and to report back to the Dáil in their own reports then.
8. Chairman.—When you say that money borrowed like this is under the personal control of the Minister for Finance at the time, does that mean what it literally means “under his personal control” and that he would draw it himself?
Mr. Suttle.—It does, yes.
9. Deputy Treacy.—Has Mr. Murray anything to say on that?
Mr. Murray.—May I, first of all, point out that I do not intend to get into a discussion on this point? The Report of the Comptroller and Auditor General on the Appropriation Accounts 1969-70, a period which covered the receipt of this particular borrowing and which was followed up by this particular legislation, does not raise any question about the constitutionality of this Act. If it had, then I would have been more ready than I am at the moment to answer any question raised by the Committee on this issue, but this issue is completely new to me.
10. Deputy Nolan.—What surprises me is that the Comptroller and Auditor General, when he was examining the accounts some time ago, saw this constitutionality problem arising as far as those borrowings were concerned but he left it until he reported to us today. I would think that he should have contacted Mr. Murray, the Accounting Officer, and informed him of his opinion, and Mr. Murray, today, would be in a position to let us know what——
Mr. Suttle.—My view on that was that this was a matter for the Dáil, not for the Minister for Finance. In effect, you are the alter ego of the Dáil and if you pass legislation authorising the Minister to do something, well that is your responsibility, it is not the Minister’s responsibility. It is you have passed the legislation, and it is with you the matter should be raised now, not with the Minister for Finance.
11. Deputy Nolan.—But the question is you have made a statement that if I was Minister for Finance and I borrowed this money in Germany or elsewhere, that it is my personal property practically. I think this is my interpretation of what you said——
12. Deputy Nolan.——and that I can do what I wish. This could be a very serious matter.
13. Deputy Nolan.—I think that to leave a thing like that for such a long time without reporting to this Committee or to the Dáil or to have even a telephone conversation with Mr. Murray about it, who would then bring it to the notice of the Minister——
Mr. Suttle.—The answer that I would expect from the Minister or from Mr. Murray, or from anybody else, there is the legislation that has been passed by Dáil Éireann. That is their authority, and what more authority could they get?
14. Deputy Nolan.—Could I ask another question, Chairman? In a case like this, who does Mr. Murray refer to about the constitutionality of the borrowing, or who do you refer to? In other words, who advises you that this would be a legal matter? Is this correct? There is a breakdown somewhere.
Mr. Suttle.—The position is that from the point of view of the Constitution, I am a constitutional officer and I am not responsible to any Minister. I am only responsible to the Dáil. The interpretation I am giving you now is my interpretation; I have not consulted legal opinion; I have no legal department attached to my office; it is my own personal view of the legislation, and of the Constitution. I have difficulties over this sort of constitutional position in other ways, and they will be raised later on during this report.
15. Deputy H. Gibbons.—I understand the Auditor General to say that had this money been lodged with the Exchequer that then it could be relodged in the German bank again, and that this would be quite correct procedure. Is this correct?
Mr. Suttle.—No. Deputy Gibbons, you took me up wrong. I felt that legislation could be passed which would enable part of the Exchequer to lie in Germany. As it stands, I think the Constitution requires that the Exchequer account be held in the Bank of Ireland. Legislation could be passed to enable, say, part of the Exchequer to lie outside the State.
16. Chairman.—For lodgment purposes.
Mr. Suttle.—For lodgment purposes and that on that basis it would form part of the Exchequer while still in Germany, and then come within my control of the Exchequer.
17. Deputy H. Gibbons.—Then, Mr. Chairman, I think it is fair comment to say that this, in fact, could become a legal question rather than a constitutional question by using the law in this manner. Are we entitled to comment on this? If by changing the law, we could lodge the Exchequer money outside the State, this is a matter of law rather than the Constitution. Anybody like to comment on that?
Mr. Suttle.—I feel that it could be solved by legislation.
18. Deputy Tunney.—I would be slightly alarmed at what the Auditor General tells us, and would like to ask a question. In the matter of this loan, was it negotiated by the Minister personally, or is it not correct to say that it would have been negotiated by the Department of Finance?
Mr. Suttle.—The first I heard of this matter was when the Assistant Secretary to the Department of Finance rang me up to tell me that he was going to Germany to sign an agreement for this loan, and that they proposed leaving the money in Germany. He wanted to know did I agree that this could be done under the existing legislation. Having looked up the legislation and consulted with my own people, I told him that he had no authority to do that. He said “I am committed. I have to go to Germany on Monday.” This was on a Friday evening. “I am going to Germany on Monday to sign this agreement and the money is going to be left there.” I said that in that case I would report the matter, and it was left at that. This was in September. In November the Minister for Finance came to the Dáil, and I forget now when the Act was passed, and said that he was proposing to introduce this legislation to enable him to hold moneys out of Exchequer in foreign countries on that basis, and explained that he had brought this money back from Germany in November and made a profit of £¼ million. No one raised one question as to what the position was in the Dáil: there was not even a single question on debate on it. The legislation introduced was passed.
Mr. Murray.—Could I answer a specific question by Deputy Tunney? The loan, of course, was raised by the Department of Finance, acting under the authority of the Minister for Finance, the actual arrangements for the borrowing were done by us in conjunction with our financial advisers.
19. Deputy Tunney.—Yes, but the second question I wanted to ask was, how could it be contended that any Minister for Finance could claim that this profit was his?
Mr. Suttle.—No, he did not claim that the profit was his, but the position is that this money lies outside the Exchequer and within the control of the Minister for Finance. The Minister for Finance is God in his own Department, and I personally think that the Constitution laid down this question of control of the Exchequer to take the fund out of the control of Ministers, that they could only draw what was authorised by Dáil Éireann. Once the money remains in the Minister’s name in Germany, it is under his personal control. It is not Exchequer moneys. Between himself and his civil servants in the Department, they can do what they like with that money.
20. Deputy Tunney.—I think the elaboration of your statement would help me. It would be personal to his Department, rather than personal to himself.
Mr. Suttle.—As head of the Department, it is his.
21. Deputy Nolan.—Would not the same apply to moneys lodged in the Exchequer here in Ireland? Is it not issued by the accounting officer, or by somebody who signs cheques in your Department, Mr. Murray? Could the same not apply to any moneys?
Mr. Suttle.—No. Any money that the Minister for Finance requires for the payment of salaries to any civil servants, or anything, can only be drawn from the Exchequer in bulk sums on my authority. I cannot touch a penny myself. I have no money. I have that authority under the Constitution that I must authorise the bank to allow the Minister to draw money to meet the ordinary expenses of Government.
22. Deputy Treacy.—Apart from the constitutionality of this matter, Mr. Suttle, in respect of the moneys borrowed—the 100 million Deutschemarks and the 15 million dollars on the Euro-bond market—are you satisfied that while they were deposited abroad and, indeed, when they were refunded here to the Exchequer, that they were expended in a manner satisfactory to you?
Mr. Suttle.—If you like, there was no hankypanky with the business. The money came in with all interest due on it and everything. There was no question of anything going astray, at all.
23. Deputy Treacy.—You still feel that, so far as you are concerned, the procedure adopted in this instance was irregular and, perhaps, dangerous?
Mr. Suttle.—I do.
24. Deputy Treacy.—And you are still satisfied that it raises an important constitutional issue.
Mr. Suttle.—I do.
25. Deputy Treacy.—And should, you feel, be rectified, as soon as possible?
Mr. Suttle.—Yes. The position is that they are the Finance Accounts for the year 1970, and there is no mention in those that there was 15 million dollars to the credit of the Government at 31st March. There is no mention of that even though they are a statement of the accounts at 31st March.
26. Deputy Treacy.—Would the point of view expressed that the moneys lay abroad for the purpose of earning a profit be a satisfactory justification?
Mr. Suttle.—I should say that there was reason to leave the Deutschemarks in Germany to earn a possible profit on revaluation, but I do not know of any reason for leaving the Euro-dollars in New York.
27. Deputy Tunney.—There is just one point of correction. While answering my question there, you spoke of a profit of a quarter of a million, presumably you meant one-eight of a million?
Mr. Suttle.—There was interest of £114,000, There was a profit on conversion from Deutschemarks into Irish pounds as well.
28. Deputy Tunney.—There was a total gain of a quarter of a million.
Mr. Suttle.—Well I have not got that figure here.
Mr. Murray.—The capital profit was £725,000. I earlier used an approximate figure of £¾ million. The precise figure was £725,000.
29. Deputy Treacy.—Would Mr. Murray not agree that it was something of a gamble?
Mr. Murray.—No. Could I just elaborate on that? I think that more correctly the position was that it was practically certain at that time that Germany was going to revalue. The only question was by how much. A gamble suggests that you can win or lose. In these particular circumstances, while one could not be absolutely certain that one was going to win there was a very good chance that we were and we were not going to lose, because in those particular circumstances all the odds were on some revaluation; none of the odds were on devaluation. In that sense it was not a gamble.
30. Deputy H. Gibbons.—I feel we could discuss this at length. It must be agreed that the business aspect of this worked out excellently, whatever about the doubtful administration of it. I was just wondering where we, as a committee, stand just now. This is an important matter if the Government propose to have further borrowing. Do we issue an interim report? How do we draw the attention of the Minister for Finance to this discussion and the doubts that exist about those loans?
Mr. Murray.—Chairman, could I, with your permission intervene on this point? I said that I am somewhat at a disadvantage in that the legal and constitutional aspects that we have been discussing here have not been brought to my notice beforehand and I am in no position to comment on them. If it were convenient for the Committee, I should suggest that I be given an opportunity to consider this point and to put in a submission to the Committee before it decides on an interim report.