Minutes of the conference between representatives of the United Kingdom and Ireland
(Secret) (I.N. (38) 5^th Meeting) (Copy)

CONFERENCE
between
REPRESENTATIVES OF THE UNITED KINGDOM AND ÉIRE

Secretary's Notes of the Fifth Meeting of the Conference held at 10 Downing Street, on Wednesday, 19th January, 1938, at 3.00 p.m.

PRESENT
UNITED KINGDOM	ÉIRE
The Rt. Hon Neville Chamberlain, M.P., Prime Minister.	Mr. Eamon de Valera, Prime Minister and Minister for External Affairs.
The Rt. Hon. Sir John Simon, G.C.S.I., G.C.V.O., O.B.E., K.C., M.P., Chancellor of the Commerce. Exchequer.	Mr. Sean F. Lemass, Minister for Industry and Commerce
The Rt. Hon. Sir Samuel Hoare, Bt., G.C.S.I., G.B.E., C.M.G., M.P., Secretary of State for the Home Department.	Mr. Sean MacEntee, Minister for Finance.
The Rt. Hon. Malcolm MacDonald, M.P., Secretary of State for Dominion Affairs.	Dr. James Ryan, Minister for Agriculture.
THE FOLLOWING WERE ALSO PRESENT
The Rt. Hon. Oliver Stanley, M.C., M.P., President of the Board of Trade.	Mr. J. W. Dulanty, C.B., C.B.E., High Commissioner for Éire.
The Rt. Hon. W.S. Morrison, M.C., K.C., M.P., Minister of Agriculture and Fisheries

Secretary

Mr. W.D. Wilkinson, D.S.O., M.C.

 

FINANCE

SIR JOHN SIMON reminded the Conference that the discussion on finance had not been completed at the morning's Meeting. The suggestion before the Conference was that Éire should pay this country a compromise figure, in the form of a lump sum settlement. He would suggest that no part of this single capital payment should be 'labelled' as representing any of the existing items due by Éire to this country. The total would in any event be low enough to make it clear that the capital equivalent of the Land Annuities was not included in it.

The two sides were not at the moment agreed as to what the lump sum should be. It did not seem to him (Sir John Simon) necessary that the gap should be bridged that day. The meetings were going to be resumed shortly, and it was the hope of all those present that a global agreement would result. That agreement would cover defence and trade questions as well as finance, and there was no necessity to reach finality on one of the items now. In the interval before the meetings were resumed, the Treasury would keep in touch with the Dublin Ministry of Finance.

MR. DE VALERA said that for his part he would certainly have wished to get nearer to an agreement on finance before the adjournment. He had a fair idea of the financial obligations which he was entering into as a result of his new commitments on defence. He knew of course that a major war was not impossible, and that this would greatly increase those obligations.

He would have liked to be able to give his Cabinet colleagues in Dublin some fairly close indication of the terms of the eventual financial settlement. As it was, he was not clear how Sir John Simon wanted the question left. If Sir John was asking for the capital equivalent of all the former payments, Land Annuities only excepted, he was afraid that was an impossible demand.

SIR JOHN SIMON said that he was suggesting adjourning the discussion on finance because the Éire Delegation were apparently unable to increase their offer. The figures contemplated by the two sides were at present so far apart that an adjournment seemed the best course.

MR. DE VALERA said that he had already indicated that the kind of figure which he had in mind was a single capital payment of some £10,000,000. He did not see how he could improve on this in view of his new defence commitments.

MR. MacENTEE pointed out the objections to a series of annual payments, from the point of view of Éire.

SIR JOHN SIMON enquired whether the Éire Ministers had considered a combined method of payment, i.e. part of the sum due to be met by a single capital payment and part by a series of annual payments.

MR. DE VALERA feared that political considerations would rule out this suggestion. Anything in the nature of annual payments would be the starting point for a new agitation. He wanted to avoid this and to bring the chapter to an end. His remarks must be understood as being subject to the Minister for Finance's judgment on what the credit of Éire would stand. It might be that Mr. MacEntee would have to raise loans for the capital equipment of the defence forces.

MR. MACDONALD suggested that there might not be so much objection to annual payments if they were not being transmitted across the Irish sea. Could not the pensions payable to citizens of Éire be dealt with on an annual basis as before?

MR. DE VALERA said that it was quite out of the question to keep up an annual series of payments in respect of these pensions. They were paid for services rendered to the United Kingdom, not to Éire.

The line he would propose to take in defending a single capital payment would be somewhat as follows. 'My desire was to bring to an end the economic war, with all the bad feeling which it has caused. I wanted to lay a foundation for good relations between the two countries. There was no way of securing this without making a lump sum payment. For that reason I recommend the payment for approval. I decline to relate it to any particular item among the payments formerly made to the United Kingdom'.

If his supporters took the trouble to make the calculation they would see from the size of the capital payment that it could not include the capital equivalent of the Land Annuities. The question would then become one of what he could ask the people of Éire to pay, not one of principle.

MR. MacENTEE said that Mr. MacDonald's suggestion was open to several objections. For one thing, the Éire citizens who received the pensions might dislike the pensions machinery being handed over to the Dublin Government.

SIR JOHN SIMON said that he was willing to accept the principle of a single capital payment, which might be absolutely without any 'label' and without any explanation - save one on the lines just suggested by Mr. de Valera.

MR. CHAMBERLAIN appealed to the Éire Delegation to consider the proposal seriously. The capital equivalent of the existing payments due by Éire was £104.05 millions. Of this total £78,000,000 was on account of Land Annuities. If the £78,000,000 were wiped out only some £26,000,000 would remain. If that £26,000,000 was the total of Éire's lump sum payment what excuse would there be for anybody ascribing it to the Land Annuities?

It was true that there was a pretty big gap between £26,000,000 and the £10,000,000 which Mr. de Valera had offered. In reply to a question by Mr. MacEntee, SIR JOHN SIMON explained that the £104.05 millions included a figure of £5.85 millions on account of compensation for damage to property.

MR. MacENTEE said that his Government were prepared to continue paying this compensation on an annual basis. Would not this reduce the United Kingdom Government's claim from £26,000,000 to about £20,000,000?

MR. DE VALERA was afraid that public opinion in his country would not be happy about continuing the compensation payments. He believed the annual £250,000 for this item to be the actuarial equivalent of an original capital sum of about £5,000,000. The ordinary person in Éire was not an actuary and would think that his representatives were paying far more than was due. MR. MacENTEE said that he was not satisfied with the figures of capital equivalents furnished by the United Kingdom Delegation - i.e. leaving Land Annuities and compensation for damage to property out of account. The figures in question were:

R.I.C. Pensions in Éire	£9.1	millions
R.I.C. Pensions outside Éire	£3.2	millions
Judicial, etc. Pensions	£ .4	millions
Local Loans	£7.35	millions

He disputed this last item. According to his calculation it should be £3.9 millions.

MR. CHAMBERLAIN again drew attention to the inadequacy from the United Kingdom standpoint of Mr. de Valera's offer of £10,000,000. Mr. de Valera had referred many times to the difficulty of commending this or that proposal to the people of Éire. Did he realise how difficult it would be to justify to the people of this country any further reduction in the payments due to them, beyond a reduction of £78,000,000, i.e. the capital equivalent of the Land Annuities? It could certainly only be considered if compensation were made for it in some other part of the all-round settlement.

MR. DE VALERA quite saw Mr. Chamberlain's argument. From their own point of view United Kingdom Ministers had made a big concession.

The Irish point of view was very different. He did not ask the United Kingdom Delegation to accept his contention, but he was prepared to argue that most of the items in the list rested on a very shaky foundation. For example, R.I.C. Pensions were entirely a matter for the United Kingdom. The Land Annuities were a thoroughly unjustified payment, and the Local Loans item was one which ought to have been extinguished under the agreement of December, 1925. He did not believe that these items would survive examination by a fair-minded arbitrator.

The two sides approached the matter from very different angles. For example, the political separation between the two countries was nothing else but a dissolution of partnership - in which the United Kingdom had gone off with all the assets of the partnership. There was no excuse for sending Éire away empty-handed. Complete bankruptcy on the part of the United Kingdom would have been the only justification.

Whatever the merits of the case, the Éire Delegation as a result of the present discussions had accepted the principle of a single capital payment. It only remained to fix this at an amount which should not bear unfairly on the Irish people.

He wished to remind the Conference once more that he had undertaken to place a new and substantial burden on the shoulders of his tax payers on account of Defence. It was his duty now to see to it that the double burden (Defence plus Capital Payment) was not too crushing.

MR. CHAMBERLAIN suggested that it would not be necessary for Mr. de Valera to paint the picture in such gloomy colours when he got back to Éire. He would be entitled, if he wished, to make a great deal of the fact that the United Kingdom Government had agreed to wipe out the Land Annuities payments. It was true that a considerable unbridged gap remained between the United Kingdom figure of £26,000,000 and the Éire figure of £10,000,000. Neither side, however, had abandoned hope of agreement. It would be very premature to do so. At the present stage of negotiations, however, it seemed impossible to carry the matter further.

It was agreed that the discussion on finance could not be carried further at the present stage of the negotiations.

 

TRADE

MR. STANLEY reported that a joint Ministerial meeting had been held that morning, and that Éire officials had been in negotiation with United Kingdom officials throughout the day. Negotiations were going ahead without interruption.

 

ADJOURNMENT OF CONFERENCE AND DATE FOR RESUMPTION

MR. STANLEY went on to say that the negotiations for a trade agreement would take between three and four weeks on the most favourable assumptions.

MR. DE VALERA and MR. LEMASS believed that if work was carried on at intense pressure the negotiations ought not to take more than one week.

MR. STANLEY promised that so far as the United Kingdom Departments were concerned the pace of the negotiations would not be allowed to slacken. He suggested, however, that the task of the United Kingdom negotiators was much more complicated than that of the representatives of Éire. The Éire demands would presumably relate to a small number of important agricultural commodities. The United Kingdom demands would relate to a very large number of industrial commodities. Some of these commodities would be quite small, but consultation would nevertheless be required with the industries concerned.

MR. DE VALERA thought that a way out might be found by means of a general formula.

MR. STANLEY said that this possibility had already been explored. It had been found, however, that the exceptions were so numerous that the suggestion was not worth pursuing. He thought Mr. Lemass was in agreement with him on this.

MR. DE VALERA said that he was very anxious that the interval between the two stages of the Conference should not be long. What he would wish to do when he got back to Dublin was to lay the position, as it existed on the adjournment of Ministerial negotiations, before his Cabinet colleagues¹, and also before one or two selected representatives of his party. Apart from that he would wish to keep silence. In practice it would be extremely difficult to do so. He would be bombarded with questions from every possible angle. In addition, a whole crop of rumours was certain to start.

MR. CHAMBERLAIN appreciated these difficulties. Very similar difficulties would arise in this country.

 

PRESS COMMUNIQUÉ

The discussion now centred on the Press communiqué to be issued at the close of the Meeting.

On the proposal being made that the communiqué should state that at the meetings during the day further consideration had been given to questions of defence, finance, trade and agriculture, MR. DE VALERA said that this list of subjects would be very embarrassing to him. It would indicate clearly that at the actual adjournment of the Conference no attention had been given to the partition issue.

He admitted that in the circumstances it was extremely difficult to decide whether to include a reference to partition or not.

MR. CHAMBERLAIN suggested the substitution of the phrase 'Further consideration was given to matters arising out of questions already discussed'.

This suggestion was adopted.

It was next considered in what form mention should be made of the date for the resumption of the Conference after the interval.

MR. CHAMBERLAIN pointed out that it would be undesirable for the Conference to resume just before the Northern Ireland elections, which were fixed for February 9th.

The discussion then turned upon the inclusion of a phrase at the end of the communiqué indicating that the meetings of Ministers would be resumed either 'about the middle of next month' or 'before the middle of next month'. After some discussion, it was agreed to use neither of these phrases, but to conclude the communiqué with the words 'to be resumed as soon as the necessary data are available for further conversations'.

DR. RYAN pointed out that it would be very difficult at the Press interview to refuse to give some indication of the length of the adjournment contemplated.

It was agreed that it should be indicated informally at the Press interview that the adjournment was for not more than a few weeks. The Press communiqué was then approved in the form contained in the Appendix to the present Minutes².

MR. DE VALERA said that on behalf of his colleagues and himself he wished to thank [the] United Kingdom Ministers for the friendly spirit they had shown during the three day's discussions. Everything of course had not gone as the representatives of Éire would have wished, but it would not have been possible for matters to be tackled in a better spirit. He was hopeful of a successful issue, resulting in the beginning of an era of better relations between the two countries.

MR. CHAMBERLAIN said that on behalf of [the] United Kingdom Ministers he cordially reciprocated this wish. He looked forward to the resumption of the discussions.

The Meeting then adjourned.+

+ On the adjournment Mr. MacDonald handed to Mr. de Valera copies numbered 1 to 7 of the 'Draft outline for Defence Agreement' as revised after the Fourth Meeting of the Conference held earlier in the day³.