PRESENT:
UNITED KINGDOM	IRISH FREE STATE
The Rt. Hon. J.H. Thomas, M.P., Secretary of State for Dominion Affairs	Mr. Eamon de Valera, T.D., President of the Executive Council and Minister for External Affairs.
The Rt. Hon. Neville Chamberlain, M.P., Chancellor of the Exchequer.	Mr. Seán MacEntee, T.D., Minister for Finance.
The Rt. Hon. Sir John Simon, G.C.S.I., K.C.V.O., O.B.E., K.C., M.P., Secretary of State for Foreign Affairs	Mr. James Geoghegan, K.C., Minister for Finance.
The Rt. Hon. Viscount Hailsham, Secretary of State for War.	Mr. Conor A. Maguire, K.C., T.D., Attorney-General.
The Rt. Hon. Sir Thomas Inskip, C.B.E., K.C., M.P., Attorney-General
THE FOLLOWING WERE ALSO PRESENT:
Sir Edward Harding, K.C.M.G., C.B., Permanent Under Secretary of State for Dominion Affairs.	Mr. J.W. Dulanty, High Commissioner in London.
Mr. S.D. Waley, M.C., Principal Assistant Secretary, Treasury.	Mr. J.J. McElligott, Secretary, Department of Finance.
	Mr. Seán Moynihan, Secretary of the Executive Council.
	Mr. J.P. Walshe, Secretary, Department of External Affairs.
	Mr. J. Leydon, Secretary, Department of Industry and Commerce
	Mr. Joseph Brennan, Chairman of Currency Commission
Secretaries Mr. R.B. Howorth, C.B., C.M.G. Mr. J.E. Stephenson. Mr. H. Brittain. Mr. W.D. Wilkinson, D.S.O., M.C.

MR. THOMAS said that it was agreed yesterday that the United Kingdom representatives would give some reply to the points raised in Mr. de Valera's second document,¹ and if that was agreed he would ask Mr. Chamberlain to give the reply.

MR. CHAMBERLAIN said that he had one general observation to make. The claims might be divided into two categories. Some had as their basis the view that certain agreements were not valid. That the United Kingdom representatives disputed. Other claims were not founded on the alleged invalidity of an agreement, but were purely addressed to questions of fairness and generosity. He only wished to say that the atmosphere in which the latter claims had to be considered could not be regarded as improved by the attitude taken up over the former category of claims.

COUNTER-CLAIM UNDER ARTICLE V

The first item in the claim was a counter-claim under Article 5 of the Treaty. This he understood was based on alleged over-taxation of Ireland since the Act of Union together with some claim to a share in the former assets of the United Kingdom.

His first point was on the legal basis. Article 5 imposed a liability on the Irish Free State which was a net liability. The Article provided that the Irish Free State should assume liability for the service of the Public Debt of the United Kingdom 'in such proportion as may be fair and equitable, having regard to any just claims on the part of Ireland by way of set-off or counter-claims'. By Article 2 of the Agreement of 1925 'the Irish Free State is hereby released from the obligation under Article 5 of the said Articles of Agreement to assume the liability therein mentioned'.

He understood that the Irish Free State Government argued that Article 2 of the 1925 Agreement did not debar them from presenting a counter-claim under Article 5 of the Treaty. In the view of the United Kingdom however, the plain meaning of Article 5 of the Treaty is that a counter-claim on the part of Ireland would be taken into account in determining the liability of the Irish Free State for the service of the Public Debt of the United Kingdom and for that purpose only. This liability had been entirely waived and the question of any set off or counter-claim against this liability no longer arose.

It was also in the view of the United Kingdom Government quite clear that the purpose of Article 5 of the Treaty was to ascertain what Ireland should pay, there could be no question of Ireland receiving money under it. It followed that there was no necessity to include provisions regarding counter claims in the 1925 agreement but when the ultimate financial settlement was effected in 1926 it was naturally thought desirable to confirm the position namely that all counter-claims were regarded as having been waived.

If, as the United Kingdom representatives maintained, the Agreement of 1926 was valid and binding no claim could now be put forward for anything arising prior to 1926.

But apart from this legal issue, there were some observations to be made on the merits of the claim as put forward. He understood that the claim was for £400,000,000 (or £399,000,000 to put it more accurately) on the head of alleged over-taxation not including interest. He wondered whether any information could be supplied as to how this claim was made up.

MR. GEOGHEGAN showed to Mr. Chamberlain a short note indicating the various totals on which the figure was based.

MR. CHAMBERLAIN inquired how this figure had been reached.

MR. GEOGHEGAN said that while in the part of the Childers Report for which Mr. Childers himself was responsible only two years had been taken, other Members of the Commission had worked out the details for other years. Some of the estimates made by Members of that Commission had reached the total of £270,000,000.

MR. CHAMBERLAIN suggested that the only figure which carried any weight as given by the Commission was Mr. Childers' own figure of two and one-quarter millions for the year 1893-4. He asked whether it was claimed that these figures were based on any full and accurate information or were they only estimates.

MR. GEOGHEGAN said that it was clearly impossible to give a really accurate figure without taking into account every item of expenditure for every year, which would be an overwhelming task.

MR. CHAMBERLAIN said that in contradiction of the view put forward in Mr. Geoghegan's note, the opinion of the United Kingdom representatives was that for the years 1801 - 1853 Ireland was under-taxed. It was for a large part of that time exempt from Income Tax, while Income Tax was charged in England; the excise duty on spirits was less than half the English rate until 1823, and was reduced to an extremely low level in that year. While he understood that at present interest was not being taken into account, he would, if any question of interest arose have to point out that the interest on the under-taxation prior to 1853 would have a relatively much greater weight than any supposed over-taxation subsequently.

As regards the period after 1853, the United Kingdom representatives did not admit that Ireland was over-taxed, and a careful examination had been made a few years ago as to the basis of Mr. Childers' calculations. It was thought that a number of factors which had entered into his calculation were palpably fallacious.

In the first place it assumed that:-

(a) The income of the non-agricultural population was not larger than that of the agricultural population;

(b) It was based on the relative Income Tax yield. But Income Tax as a rich man's tax would provide a larger proportion of the revenue in a richer country and a less proportion of the revenue in a poorer country. The result would be that on this basis the taxable capacity of Ireland was assessed at less than was correct;

(c) It took no account of the progressive nature of United Kingdom taxation - a factor which has, of course, increased in importance since Mr. Childers' Report in 1896;

(d) Ireland had always been exempt from certain taxes, such as railway duty, establishment licences, patent medicines, land tax and inhabited house tax;

(e) The way in which Income Tax was levied on farmers gave them an artificial benefit. Profits were taken for Income Tax assessment purposes as equivalent to a third of rent, which was too low an assessment.

For these reasons the Treasury believed that Mr. Childers' figures were not sound and could not be taken as the basis of a reliable calculation. Broadly speaking it was certain that Ireland was under-taxed prior to 1853, while it was very doubtful whether, and if so to what extent, Ireland was over-taxed from 1853-1921.

ABANDONMENT OF THE GOLD STANDARD

The next Head of claim was in respect of the abandonment of the gold standard. He felt that it was somewhat extraordinary to put forward a claim in respect of transactions long after the final settlement of 1926.

But apart from that, he would consider the claim on its merits. In the view of the United Kingdom representatives the abandonment of the gold standard involved no loss to the Free State as a whole but rather a profit. If the sterling assets of the Irish Free State were depreciated, so also were the sterling liabilities, and one had to be set off against the other. The disparity between prices and cost had been reduced as a result of the abandonment of the gold standard, and those parts of the world which had abandoned the gold standard (e.g. certain Dominions, Scandinavia etc.) had suffered less from the economic depression than those countries which had attempted to maintain it. On the whole, therefore, he thought that the abandonment of the gold standard was an advantage to the Irish Free State rather than a disadvantage, and if there was to be any claim he thought it should be from the United Kingdom against the Irish Free State rather than the reverse.

The abandonment of the gold standard by the United Kingdom was, however, a purely domestic affair which was the concern of the United Kingdom alone. Several foreign countries had put forward claims for compensation in respect of loss on sterling balances, but these had been rejected and dropped; they did not appear to have been regarded seriously by the countries themselves.

THE ROAD FUND

MR. CHAMBERLAIN said that no reference was contained in the Irish Free State Memorandum to the fact that it had been agreed to submit the dispute as to the method of apportionment of the Irish Free State share of the Road Fund to the arbitration of Sir Henry Strakosch,² and that both sides had agreed to accept the findings of the arbitrator on the matter.

COINAGE

MR. CHAMBERLAIN said that the Irish Free State claimed that the United Kingdom Government was ￿liable to redeem all British Token Coinage rendered redundant in the Irish Free State by the issue of the National Coinage there'. He (Mr. Chamberlain) had before him a copy of the Agreement made in 1929 between the two Governments, under which as a concession, the British Government had agreed to redeem United Kingdom silver by ten instalments from April 1930, amounting in the aggregate to £600,000. The United Kingdom Government had carried out that agreement, and he would like to ask whether the validity of this particular agreement was now repudiated.

MR. DE VALERA observed that the purpose of the present Conference was to reach a final settlement on all the outstanding claims of the Irish Free State. This particular agreement was not regarded by the Irish Free State Government as in the same category as the agreements of 1923 and 1926, but in the opinion of the Irish Free State all questions, including this Coinage question, which gave rise to a feeling of grievance and unfairness should be brought into the final settlement.

In reply to Mr. Chamberlain's specific question, he stated that the Irish Free State did not challenge the validity of this agreement of 1929 in the same way as they challenged the validity of the agreements of 1923 and 1926.

MR. MacENTEE wished it to be understood that while the Irish Free State did not challenge the validity of the agreement, they did regard it as an unsatisfactory solution of the problem.

MR. CHAMBERLAIN pointed out that the claim was that the United Kingdom Government was liable to redeem the coinage. MR. DE VALERA repeated that in the view of the Irish Free State this matter should be adjusted on grounds of natural justice.

MR. CHAMBERLAIN thought that it was important to establish as he understood to be the case, that this was not a claim based on any legal considerations but was a claim that the agreement actually reached in 1929 had not constituted, in the view of the Irish Free State, a fair settlement.

MR. DE VALERA agreed that the Irish Free State case was that a fair settlement had not been made.

MR. CHAMBERLAIN pointed out that silver coin is only legal tender for sums up to 40/- and that in other similar cases, e.g. Australia and the Union of South Africa, the United Kingdom had consistently refused to redeem United Kingdom silver. Moreover, it must be remembered that the banks in the United Kingdom held large stocks of redundant silver which they had to carry at a loss.

CURRENCY

MR. CHAMBERLAIN said that the Irish Free State claimed the full amount of the profits derived by the United Kingdom Government between the 1st April, 1922 and the 9th September 1928, inclusive, from the circulation of British Treasury notes in the Irish Free State, and from the Treasury notes or certificates required to be held by the Irish Banks to cover their Note circulation appertaining to the area of the Irish Free State. With regard to the first part of the claim, it should be remembered that this circulation of United Kingdom notes was a measure taken at the time purely in the interests and for the convenience of the Irish Free State. It was not the idea of the United Kingdom Government, or in accordance with their wishes at the time, that these notes should circulate in the Irish Free State after the Government of the Irish Free State was in a position to have a note issue of their own. The Issue Department of the Bank of England objected to the circulation of its notes outside this island. In point of fact, British notes did circulate in various parts of the Empire as, for example, in Malta and Gibraltar; it was always open to a territory to obtain profits of note issue by issuing its own notes. In the view of the United Kingdom Government it was an unjustifiable contention that the responsibility for a note issue should fall exclusively upon them and the profits be shared with others.

NATIONAL TEACHERS' PENSION FUND DEFECIT

MR. CHAMBERLAIN reminded the meeting that on the previous day Mr. MacEntee had assented to the view that this was a moral and not a legal claim, based on the fact that the Fund was found in 1926 to have been in deficit at the time of its transfer in 1922. In accordance with the general principles on which functions were transferred, the Irish Free State took over both the assets in question and the corresponding liabilities in the state in which they existed at the date of transfer. There was clearly no legal claim, and if this proposal amounted in effect to an appeal to the sense of fair play of the United Kingdom Government, it could not be considered alone, but might be brought into account in any general settlement.

MR. THOMAS observed that no record could be found of a claim of this nature having been made before.

MR. MacENTEE observed that before the war actuarial investigations took place from time to time, and steps were taken by Parliament to deal with any deficits on the fund. Owing to the situation in Ireland after the war, there was no proper opportunity of actuarial investigation of the position until 1926, and it was certainly the case that when the fund was transferred in 1922 the real position was not appreciated.

MR. CHAMBERLAIN said that, whatever might be the force of this argument, it could not be applied to this particular claim alone, and the claim would, therefore, have to be considered in connection with other similar moral claims.

OTHER CLAIMS AND ITEMS

MR. CHAMBERLAIN observed that with one exception these claims did not involve any very large amounts of money.

(a)National Health Insurance (Women's Equalisation) Fund.

The Irish Free State claimed a portion of the monies (£290,000) in the fund on the 1st April, 1922. The fund was, however, wound up retrospectively from the 1st January, 1922, and the monies in question were surrendered to the British Exchequer. The United Kingdom rejected the claim on the ground that the sums were surrenderable voted sums and not a non-surrenderable grant-in-aid transferable to the Irish Free State.

(b)Ex-Enemy Debts.

The Treaty provisions quoted in the Irish Free State memorandum deal with the liquidation through the Clearing Office of pre-war debts due from Free State nationals to German and Austrian nationals and vice versa. Under an agreement of 1923 the Free State was to make itself responsible for the collection of debts from its nationals (about £9,000) and to receive as remuneration for their services commission and interest on the proceeds of the liquidation of ex-enemy property in the Irish Free State. He understood that the Irish Free State were finding some difficulty in collecting these debts, and wished the British Government to take some responsibility for them. It was difficult to see any justification for this contention, but he was quite prepared to discuss the matter orally on the first opportunity.

(c)Quit Rents.

The point at issue here was whether the Crown Revenues from quit rents should have been payable to the Irish Free State from the 1st April, 1922, or from the 6th December, 1922 (the latter date being that on which the Constitution came into force). The Law Officers of the United Kingdom had advised in favour of the latter date, and the United Kingdom had, therefore, retained the revenue at stake. The Irish Free State Government had now raised a further point, that the sums received in respect of the redemption of quit rents in Ireland since 1891 ought not to have been invested in England, but should have been invested in landed property in Ireland. He (Mr. Chamberlain) saw no justification for attempting to go back retrospectively on past actions in this way, or in departing from the general rule by which the actual assets at the date of transfer were handed over.

MR. MacENTEE pointed out that if, as he claimed was the legal position, the monies in question had been re-invested in Ireland, the land would have passed to the Irish Free State Government. Mr. Chamberlain said that if this new point was based on some legal consideration he was prepared to examine it further.

(d) Dead Notes.

MR. CHAMBERLAIN agreed that this particular matter should be included in any general settlement that might be reached.

(e) Post Office Dormant Accounts.

MR. CHAMBERLAIN said that this claim appeared to be one for a share of the assets but not for a share of the liabilities, and he assumed that the latter had been omitted from the claim by inadvertence. There would be no objection to transferring assets if the Irish Free State would assume the corresponding liabilities, and also of course if the transfer of the assets was agreed to by the depositors or their legal representatives.

MR. MacENTEE said that apart from the question of liability which might be discussed further the Irish Free State liabilities in question might be regarded as part of the public debt of the United Kingdom for which the Irish Free State had no responsibility.

(f) Death Duties.

MR. CHAMBERLAIN said that the question of Death Duties could not be considered alone, but must be examined as part of the general question of double taxation, and in particular in connection with the whole question of Income Tax. The United Kingdom Government were fully prepared to discuss with the Irish Free State Government the whole Double Taxation question, including the Death Duties and Income Tax aspects of it.

MR. THOMAS thought that the position of the negotiations, now that the reply of the United Kingdom Government to the second Free State Memorandum had been heard, might be summed up as follows:-

1. The Free State had advanced arguments of a moral, not a legal character, which covered the subjects dealt with in the agreements of 1923 and 1926.
2. They had, in addition, made a general claim that Ireland had through-out the 19th Century been over-taxed.
3. To this, MR. CHAMBERLAIN had indicated that, in his view, there was strong grounds for maintaining that Ireland had been under-taxed in the first half of the 19th Century.

It seemed to him (MR. THOMAS) that most of the factors which had been brought to light in the present discussion had been present in the minds of those who negotiated the Ultimate Financial Settlement of 1926; his conclusion was that in that agreement the Free State had not made a bad bargain.

If Mr. De Valera wished it, the United Kingdom Delegation would gladly let him see in writing a statement of their case as it had been developed that morning.

MR. DE VALERA said that he would be obliged if this could be done.

Dealing with the question of Irish taxation, he went on to state that, though he did not pretend to be in possession of exact figures, he was certain that there had been gross over-taxation. There was a consensus of opinion to this effect among the authorities (e.g. Sir A. MacDonnell) who had gone into the matter, and the Irish Free State delegation were more than ready to see the facts investigated anew.

The presumption was that Great Britain had used its superior strength in order to ensure for itself a comparatively lighter burden of taxation; he was certain that investigation would show that a substantial refund was due. Irish opinion was very strong in the matter and the most exhaustive examination would be required before it could be convinced that it had been wrong.

MR. THOMAS thought that the prevailing impression in Ireland could be very largely accounted for by the psychological effect of continuous anti-British propaganda.

MR. GEOGHEGAN thought that the impression in Ireland was due to something more substantial than ignorant clamour. It was true that Mr. Chamberlain had suggested that Ireland had been under-taxed until 1853, but he, Mr. Geoghegan, was prepared to prove that from 1800 to 1853 there had been a large and steady increase year by year in the Irish contributions to the Imperial Exchequer; and a simultaneous steady increase in Ireland's impoverishment. Things had turned out very differently from the expectations which had been held out to the Irish Parliament when it had been induced to agree to the Union of 1800. It had been suggested then that closer association with Great Britain was certain to increase the prosperity of Ireland. Even at that time the Irish representatives had been unconvinced and had stipulated for a revision of their taxable ratio every 20 years, starting in 1820. It was true that the duty on spirits remained at a low level in Ireland throughout this period, but the general taxation agreement was violated in 1817 (without waiting for the revision of 1820) by the Parliament at Westminster, subjecting Ireland to indiscriminate taxation. This was done without any investigation into relative capacities of payment and without any regard to Ireland's progressive impoverishment.

Turning to Mr. Chamberlain's argument that the leniency of the income tax towards agriculture had been of special benefit to Ireland, MR. GEOGHEGAN claimed that the method of assessing agriculturalists to income tax up to the Great War had, on the contrary, operated to the disadvantage of the Irish farmers. It had worked as a device to extract from them large sums which could never otherwise have been obtained. Irish land-owners paid their income tax on the full value of their property, and in addition the occupying farmers on this property were charged with income tax on one-third of the annual value of their holdings. It was true that where it could be shown that in fact no profits were made, no income tax was legally due by the farmer, but things did not work out in this way, and a poor community of farmers who kept no accurate accounts could not afford when they were running their farms at a loss, the luxury of accountants and solicitors. The result was that they paid the same tax in good years and bad years alike. It was no use their going to the tax collectors and saying that they were not liable when they could not prove it.

MR. CHAMBERLAIN intervened to explain that this had not been his point. He had tried to show, not that the Irish farmer was more favourably treated than the English farmer, but that agriculture everywhere had been more favourably assessed than industry. This was a distinct advantage to an agricultural country like Ireland.

MR. GEOGHEGAN said that Ireland had an equally strong case on the broader aspects of taxation. There was nothing, he thought, in the argument that Ireland had been free of income tax for a long period of years during which it had operated in Great Britain. The position was as follows:-

1800 to 1842	No income tax in either country
1842	Income tax imposed in Great Britain.
1853	Income tax imposed in Ireland.

MR. CHAMBERLAIN intervened again to say that income tax had been payable in Great Britain from the beginning of the century until 1816.

MR. GEOGHEGAN'S impression was that this was something different from the modern system of income tax. It was a special measure of war taxation such as had been imposed once or twice in the 18th century.

Ireland's overpayment of income-tax was, however, by no means the whole story. The Childers Commission of 1894 had reached similar conclusions over the whole field of taxation, and he had not thought until to-day that their conclusions were in dispute. They were certainly in agreement with the evidence of economic witnesses before the Primrose Commission and with speeches by various authorities at Economic Congresses.

MR. THOMAS had heard nothing to make him change his view that the position as a whole might remain where it had been left by the Ultimate Financial Agreement of 1926.

MR. GEOGHEGAN thought that in 1926, as in 1921 and 1923, the Irish Delegates had really been allowed to make fools of themselves. There was not a scrap of evidence to prove that on any of these occasions the United Kingdom Government had even known the true facts of the Irish case. The same had happened in the House of Commons in 1920. It was no use pretending that there had been any expert Irish criticism of the Government of Ireland Act, for it was well known that the Irish M.Ps. had abstained from attending at Westminster since 1918.

The Agreements of both 1923 and 1926 were complete victories for the British side, who had bluffed their opponents throughout. The United Kingdom representatives had been allowed to carry their point without any proper investigation of the general financial relationship between the two countries.

MR. GEOGHEGAN said that he would agree with one part of Mr. Thomas' remarks, namely, that in which he said that the merits of the whole of the claims should be discussed. The Irish Free State had always considered that, on merits, their case was unanswerable. If they had had to devote a lot of time to the legal case it was because until yesterday they had had to rely solely on the British newspapers for the British view of the Irish arguments, which had been therein represented not merely as fallacious but as consciously fraudulent. No item of their case, however, rested entirely on legal considerations. Some of their cases, for instance, those in the first memorandum were all of a double-barrelled nature and were both legal and meritorious. There were a larger class of cases, namely, those in their second memorandum, which he personally would not put forward on technical legal grounds but for which the case, on their merits, was just as good as in the first class. On the question of over-taxation, for example, the Irish Free State had an overwhelming case on merits.

In reply to Mr. Chamberlain, who said that all the Irish Free State claims appeared to have been made on the basis of the Childers Commission figures, and that if the latter could be proved to be wrong then the whole claims were wrongly founded, Mr. Geoghegan pointed out that a Commission had enquired in 1864 also into the taxability of Ireland. He agree that while the Childers Commission had paid a lot of attention to income tax, there had been some difficulty in arriving at a measure of taxable capacity. The case might be put in a simple way by having regard to the amount of untaxable income left to British and Irish individuals respectively. In Great Britain over the period in question, every individual had received a proper subsistence allowance, and a great many had more; but in the same period in Ireland, especially in the agricultural areas, the population existed on less than the proper subsistence allowance. So far from there being anything to tax in Ireland the farmer and those directly dependent on him, living on little if anything above the subsistence allowance, were, in many cases, under-fed and under-housed. Taking, for example, £150 a year as the bare subsistence allowance in each country. If an Englishman had £160 a year and £9 were taken from him in tax, he would complain. In Ireland, if a man had £150, to tax him even 1/- would give him a legitimate grievance. The income tax was a mirror of the economic position of the countries, and so the Childers Commission was right in building on it.

The Irish Free State case was also that since 1893 their country had been overtaxed, although for that period they did not call in aid any Commission. They relied on the Treasury returns which established their case for, at any rate, the years 1893-1908. They also relied on the evidence given before the Primrose Committee in 1911, and referred particularly to the evidence of the late Lord MacDonnell, a particularly accurate witness and a United Kingdom official who represented the overtaxation of Ireland as continuing. One of the main contentions of the Irish Free State representatives was that the country had been robbed of the machinery provided in the Act of Union for the revision of their financial position every twenty years. While the Union had contemplated that indiscriminate taxation should apply only when Irish prosperity had greatly increased, it had actually been introduced at an earlier date, in order to avoid the piling up of a high separate debt in Ireland.

In conclusion, Mr. Geoghegan added, their calculation of overtaxation had been made on the basis of the Childers and Primrose enquiries and had led to a claim for £399 million without interest. That figure, of course, applied to the whole of Ireland and once a claim had been agreed in principle it would be liable to adjustment on account of the separation of Northern Ireland. There would also remain a few further details for settlement.

MR. DE VALERA did not think the Conference was getting much closer together on the points at issue. It was the first time that he had heard it suggested that a discussion of the question of overtaxation could not end in favour of Ireland's case. His country had declined whilst Great Britain had progressed by leaps and bounds, and that was a direct result of the Act of Union. The Primrose Committee had suggested that Ireland should be recouped by a grant of a subsidy of £3 million (the grant to take the form of Great Britain's assumption of liability for Old Age Pensions in Ireland) and the Act of 1920 had made provision of a similar kind which took the form of the gift of the Land Annuities. From the Irish point of view the claim in respect of overtaxation was the most important item of their claim. He referred to Mr. Thomas's statement during the discussion in the House of Commons of December 1925 on the Boundary Agreement and Article 5 of the Treaty. Mr. Thomas has said -

'I have heard the calculation of my Rt. Hon. Friend that the Treasury estimate was somewhere in the region of £150,000,000 under Article 5. I think £128,000,000 was the first figure, with interest up to £150,000,000 ... It was put to me that the estimate of the South of Ireland - and they have made some wonderful calculations - was £280,000,000 due to them. As one who knows something of the Irish temperament in this matter, I quite frankly told my friends, and I think it was the view of all of us who were connected with it, that when we got down to brass tacks and attempted to estimate any value so far as pounds, shillings and pence were concerned, in the case of Article 5, we must write it down as nil ...'

MR. CHAMBERLAIN suggested that all that this meant was that Mr. Thomas did not accept the Irish calculation as correct, but that no-one expected that anything would, in fact, even be paid by Ireland under that article. Mr. Thomas said that Mr. Chamberlain had rightly interpreted his views.

MR. MacENTEE pointed out that it was not the view of the present Irish Free State Government that the 1925 Agreement did write down the counter-claims under Article 5 to nil.

SIR JOHN SIMON said that, apart from technical considerations, he thought that one fact would be admitted on both sides. Supposing there had been no past history and it was a question of the division of a Public Debt of a country which had been divided into two countries, it was not open to dispute that Article 5 would have allocated a share of £150 million of Public Debt to one of the parties. But to-day that share could not be claimed by the other party since the Irish Free State was no longer liable for it. This fact must be allowed for in any discussions on the question.

MR. DE VALERA replied that he did not accept the estimate and said that the Irish Free State Government regarded the monies which had been paid by the Irish Free State in the last few years as in the nature of payments on account of the Public Debt. He referred particularly to those in respect of land annuities and pensions. The British Government, in this way, had got a debt contribution through the back door.

MR. DE VALERA added in regard to the 1925 Agreement that political considerations were involved in the set-off - not only monetary claims but also the boundary settlement. With regard to the assets, the Irish Free State claim was that unless the former Union was a bankrupt concern they should have a share of assets; they claimed also reparation for unfair treatment while within the partnership. Any contribution to the public debt was written down as nil by the Agreement of 1925; that Agreement did not extinguish the counter-claim.

On the question of over-taxation, no authoritative calculation had ever been made that had not shown vast sums in favour of Ireland. This was recognised in the Act of 1920³ by the 'gifts' therein made to Northern and Southern Ireland.

MR. THOMAS inquired what the ideas were as to future procedure.

MR. GEOGHEGAN observed that they had not dealt with the other matters referred to in Mr. Chamberlain's opening statement at that meeting.

MR. THOMAS said that the position was that the Irish Free State representatives had heard the views of the United Kingdom representatives, and that the United Kingdom representatives had heard the views of the Irish Free State representatives, but that the two sides did not appear to be much nearer.

MR. MacENTEE said that the expression of the various points of view at least afforded a background against which, and showing the direction in which, each side was moving.

MR. DE VALERA said that he regarded the Conference as engaged upon the consideration of (what was always contemplated) an ultimate financial settlement. He said that there had now been some years for consideration of the working of the various arrangements which had been in operation, and it was possible to see how things had turned out. If the two countries were to get along in harmony at all it was worth while trying further to clear the ground.

It was agreed to adjourn until 3 p.m. when discussions would be resumed on the other items (apart from the question of over-taxation) dealt with in Mr. Chamberlain's statement.