'Note of Discussion at Treasury - 21st June, 1948 (morning)'

The Minister for Finance, Mr. McElligott and Mr. Hogan interviewed Mr. Rowe-Dutton at the Treasury at 11.45 a.m. on 21st June. Mr. Curran of the Treasury was also present.

Mr. Rowe-Dutton produced a draft note, which he had prepared, of the discussion between the Chancellor of the Exchequer and the Irish Ministers on the previous night. Amendments were made in the draft and it was then accepted as an agreed version of what had transpired. As this paper has already been circulated it is not annexed hereto.

Mr. Rowe-Dutton then referred to the agreement reached on the previous night and he suggested that it would be desirable to reach an agreement as to the text of some communiqué to be issued on the subject of the dollar position. This would not be part of the agreement between the two countries but it would be desirable to make some reference to it in any public announcement. He went on to say that the Chancellor's assurance that Ireland should have continued access to the Pool in the event that her other resources, including ERP loans, did not cover her essential requirements, was given on the understanding that Ireland would take measures to reduce to the minimum her level of dollar expenditure. In other words, if ERP assistance for Ireland was insufficient she was obviously not entitled to a blank cheque on the reserves for an unknown deficit.

The Minister for Finance said that the Irish Government had already taken a decision not to take up the loan for the current quarter, for reasons which had been fully explained. He could not commit his Government absolutely to a new decision, but, undoubtedly, the Irish Ministers present in London would recommend the taking of the loan for the current quarter and similarly would do their utmost to obtain the maximum American aid for subsequent periods. As regards economies in dollar expenditure, measures of that kind were not always easy and he invited Mr. Rowe-Dutton to say what he had in his mind on that point.

Mr. Rowe-Dutton said that he spoke on that subject with some diffidence. It had never been the Treasury's practice to suggest economies to the Irish authorities. The need for economy was stated and, of course, it was for the Irish authorities themselves to decide in what direction it was possible to meet that need. He expressed the view that the Irish standard of living was higher than in the U.K. He referred to the large number of American cars on the road, the apparent liberality of petrol supplies, the wide range of goods on offer to tourists. He said that Irish dollar expenditure in 1938, when there were no exchange restrictions, had been at a level which multiplied by 250% to allow for increased prices, did not exceed $67 mill. That was gross expenditure comparable with Mr. McElligott's forecast of $112 mill. for the coming twelve months. It was pointed out to Mr. Rowe-Dutton that comparisons between 1948 and 1938 were illusory. Many goods formerly obtained from other sources had now, per force, to be bought in the dollar area. Moreover, forecasts of future expenditure took account of items hitherto lacking, which had to be bought in the dollar area if Ireland's agricultural economy and ancillary industries were to reach reasonable productive capacity. Mr. Rowe-Dutton said that he hoped our programme of dollar purchases would be fully covered by ERP. If that were so our dollar expenditure was of no concern to the U.K.; it was only if a gap had to be covered by the Pool that the question of our level of dollar expenditure would be a matter of concern to the Treasury. If that situation arose there would have to be further consultations at a future date.