Memorandum prepared by the Department of Finance for the Department of External Affairs on sums claimed by the British Government as due from the Irish Free State¹

In compliance with the request from the Department of External Affairs this morning for an estimate in the briefest possible terms of the capital value of the sums claimed by the British Government as due from the Irish Free State, other than Land Purchase Annuities, the following statement, which is required this evening, has been prepared. It will be understood that the figures given in this statement are necessarily approximate and in some cases, e.g., pensions, little more than guesses.

2.   The main heads of the British claim, other than Land Purchase Annuities, relate to pensions and these may be grouped under the following heads - Civil Service (including Inland Revenue and Customs and Excise but excluding Post Office which continue to be collected), R.I.C., and Judicial Pensions, with Allied Services and Audit Services. These pensions are, for obvious reasons, a declining charge but the rate of decline cannot be estimated in view of our lack of information as to the age composition of the various bodies of pensioners. Further, the fixing of the date on which the capital value of the various items in dispute, other than Land Purchase Annuities, is to be assessed is a matter of some difficulty. Payments have been withheld since 1932 but the British have endeavoured to effect recovery by means of penal duties. Up to the 31st March, 1937, the total of such duties collected by them was 21.9 million pounds as compared with a total of 24.1 million pounds withheld, leaving what they regard as a deficit of 2.2 million pounds. If we exclude altogether Land Purchase Annuities and the kindred figure of Bonus and Excess Stock charges, the total amount withheld up to 31st March last has been 8.6 million pounds which is 13.3 million pounds less than the sums collected by the British under the penal duties.

3.   In the following table the 1st April, 1937, is assumed as the date for the necessary capital calculation, which is made on the basis that any sums due under the respective heads have been discharged up to that date.

4.   A further assumption has had to be made as regards the rate of interest and here 4% has been taken. The lower the rate of interest assumed the greater, of course, will be the capital liability and the figure mentioned is as high as we can go. The British will probably regard it as excessive and consider something between 3% and 3½ as the maximum justifiable.

5.   It should be pointed out that no reference has been made in this Memo, to counter-claims against the British e.g. in respect of over-taxation, currency and coinage, Road Fund and other items set forth in the statements presented in October, 1932, by the Free State to the British Government.

6.   In view of the foregoing it will be understood that the following estimates of the capital value of the amounts withheld from the British Government, other than Land Purchase Annuities, cannot be advanced as firm figures except in the case of item V., Local Loans Fund Annuity, and must, accordingly, be used with caution.