The purpose of this Bill is to extend the existing statutory powers of guarantee vested in the Minister for Finance in respect of Córas Iompair Éireann. The House will be already aware that there is provision in existing legislation covering the borrowing of moneys for capital purposes by CIE and the guaranteeing of such borrowings by the Minister for Finance.
Under subsection (2) of Section 30 of the Transport Act, 1950, the Minister for Finance is empowered to guarantee the repayment as to principal and interest of moneys borrowed by CIE under the provisions of that Act. Guarantees under subsection (2) of Section 30 of the Act relate to guarantees of borrowing for long-term capital requirements. CIE may also borrow for short-term requirements and the Minister for Finance is empowered also under subsection (1) of Section 30 of the same Act to guarantee such borrowings. The maximum amounts which the Minister for Finance may guarantee have been amended by the Transport Act, 1955, and the GNR Act, 1958. Under those Acts, the upper limits of borrowing by CIE which might be guaranteed by the Minister for Finance were raised to £12 million for long-term and £1½ million for short-term borrowings.
The Bill is intended to serve a purpose rather different from the existing statutory provisions governing guarantees by the Minister for Finance. The existing provisions empower the Minister for Finance to give guarantees only in respect of borrowings. The Bill is designed to enable the Minister for Finance to guarantee, in addition to borrowings, the payment by CIE of moneys due by the Board on foot of contracts entered into.
CIE had received an attractive offer of extended payments at favourable terms for the purchase of new diesel locomotives. The terms of contract provided for payment in instalments over a period of five years, with interest at the rate of 5½ per cent. per annum on the balance outstanding subject to a Government guarantee. As the law stood, the statutory powers of the Minister for Finance did not enable him to give a guarantee in the terms required.
It is the view of the Government that acceptance of favourable credit terms such as were offered in this case should not be prejudiced by the absence of a statutory power enabling the Minister for Finance to give the required guarantee when the Minister for Finance is in fact already empowered to give a guarantee in respect of borrowings.
The existing statutory limit for borrowing for long-term purposes by CIE has been reached by the recent £2 million stock issue and it is not intended to propose a new upper limit for such capital borrowing by CIE until the position of the whole organisation comes to be reviewed towards the expiry of the five-year trial period provided for in the Transport Act, 1958. In any event, it was desired to accept the particularly favourable extended credit terms which were obtainable in the present case. A payment scheme of this kind amounts in fact to a pay-as-you-earn scheme which is a wholesome arrangement for an organisation faced, as CIE is with the obligation to pay its way.
The enactment of this Bill will enable the Minister for Finance to implement an undertaking given to CIE that power would be sought from the Oireachtas to permit of a guarantee being given for the payment by the Board of the instalments specified in the contract for the new diesel locomotives to which I have referred. To enable the construction of the locomotives to be put in hands at once with a view to early delivery, authority was given to CIE on 8th March, 1962, to purchase the locomotives from General Motors and later, on 18th April, 1962, CIE were given a formal undertaking on behalf of the Government subject to subsequent legislative confirmation, that payments under the contract would be met as due.
The Government decided that, as the authority of the Oireachtas was to some extent being anticipated, it would be appropriate, if only as a matter of courtesy, to include a reference to this particular contract in the Bill. It was claimed by certain Deputies in Dáil Éireann that the contract should, therefore, be scheduled to the Bill or tabled in the House. There is no precedent for publishing in this, or any other manner, a commercial contract entered into by a State-sponsored body in the exercise of its statutory functions and, as the inclusion of a reference to the contract was not necessary, I withdrew it by amendment in the Dáil.
Unfortunately the opportunity was taken by certain Deputies to suggest that my refusal to schedule or table this contract was an attempt to cover up irregularities by CIE and the suggestion was made that the contract had been secretly and irregularly entered into prior to the invitation of tenders from other suppliers. This imaginative invention was based on a newspaper report of last October, when representatives of General Motors were visiting Dublin, that they had obtained an order for 30 locomotives from CIE This report was publicly denied by CIE at the time. The representatives of General Motors had indeed visited CIE and were naturally seeking business. They were told that CIE would probably be in the market soon for about 30 locomotives and that they would probably be invited to tender. The Board did decide to acquire 37 diesel locomotives and, on 5th December, 1961, General Motors and seven other manufacturers were invited to tender. The General Motors tender was accepted on 28th February, 1962, subject to the provision of the necessary Government guarantee, and the contract was finalised on 4th May, 1962. How General Motors could be expected to accept an irregular and presumably unenforceable contract in October last when they would not accept a perfectly legitimate contract some months later without a Government guarantee of payment is beyond my comprehension.
I mention this matter only to express my dislike of the unfair and unworthy reflection on the Chairman and Board of CIE which it implies. The debate in the Dáil makes it essential for me to observe that even if Deputies and Senators disagree with the policy and actions of the Board, it is not too much to ask that they should abstain from using the privileges of the Oireachtas to make statements, without a shred of evidence, which can only reflect on the honesty and good faith of the directors and chairmen of State boards.
The question of diesel locomotives does not arise on the Bill as amended but to anticipate Senators' questions I may say that, while neither I nor my Department had anything to do with the tender or contract, the acquisition of the 37 diesel locomotives was approved by me as part of the capital programme of CIE. The locomotives are essential for the maintenance of an efficient railway system even if the system has to be on a smaller scale than at present. The locomotives will in addition enable CIE to achieve substantial economies in operation and thus help the Board to achieve its statutory obligation to pay its way.
I recommend this Bill for the approval of the House. It does not commit the Government or CIE to any expenditure that would not otherwise be undertaken. It merely provides an alternative to existing borrowing procedure which can be used where advantageous. Particularly favourable terms were offered in the case to which I have referred and may well be offered in the case of other transactions from time to time, because the transaction qualified for export credit financing arrangements and, under such arrangements, it is generally necessary to provide a Government or similar acceptable guarantee if the best terms are to be got.