I move:—
Go ndeontar suim Bhreise ná raghaidh thar £10 chun íoctha an Mhuirir a thiocfaidh chun bheith iníoctha i rith na bliana dar críoch an 31adh lá de Mhárta, 1939, chun Tuarastail agus Costaisí Oifig an Aire Talmhaidheachta agus seirbhísí áirithe atá fé riaradh na hoifige sin, maraon le hIldeontaisí-i-gCabhair.
That a Supplementary sum not exceeding £10 be granted to defray the Charge that will come in course of payment during the year ending the 31st March, 1939, for the Salaries and Expenses of the Office of the Minister for Agriculture, and of certain services administered by that Office, including sundry Grants-in-Aid.
This Estimate relates to the final payments to be made under the agreements relative to the Roscrea meat factory. It will be observed from the printed Estimate that these payments comprise compensation for the factory extension and also for the cessation of cattle supplies and that of the total amount payable, namely, £32,400, there has already been advanced £11,000. The Appropriation-in-Aid of £16,000 represents the repayment of a loan of that amount which was made to the Roscrea Meat Company and which was utilised as part of the capital expenditure incurred by that company in the building and equipping of the original factory. This loan was secured by debentures which are now to be repaid in full.
When moving a Supplementary Estimate to which the Dáil agreed on 9th February last, I referred to the circumstances under which it was proposed to pay the Roscrea Meat Company, Ltd., compensation for the extension of their factory—an extension which they undertook at my request. Now that a settlement of outstanding matters in regard to the Roscrea factory has, subject to the approval of the Dáil, been reached, it may be well for me briefly to recapitulate the statement I made on 9th February last and also to refer to the replies which I have given to questions, since put to me.
On 23rd March last, in reply to Deputy McGilligan, I outlined the various schemes for the elimination and utilisation of uneconomic cattle which were considered. The Dáil will recollect that one alternative proposal envisaged a weekly supply of only 200 animals for slaughter at a public abattoir; that another proposal, which related to supply of double that number of animals, contemplated Government responsibility not only for collection but for transport and lairage of the animals, as well as the pro vision of from £18,000 to £20,000 for reorganisation of and addition to existing plant, of an export bounty on such products as might not be absorbed by the home market and of a weekly advance to cover wages and manufacturing expenses until such time as markets were found and the products sold. The proposals advanced by the group which subsequently built and equipped the Roscrea factory embodied an undertaking to provide buildings and machinery at an estimated cost of £20,000, of which 25 per cent would be found by the promoters and 75 per cent. by way of loan from the Government; an undertaking to have the factory working within three months of the date of the preliminary agreement with the Government; payment by the company of the freight charges on all cattle delivered by rail to the factory; and provision for dealing with a normal supply of from 800 to 1,000 animals per week shortly after the commencement of manufacturing operations, and thereafter with up to 1,300 cattle per week in exceptional circumstances. This group was in a position to find an external market not only for their edible products but also for their non-edible products, including such quantity of meat meal as was not absorbed by the home market. It will, therefore, I think, be obvious to the Dáil that the proposals of what I may term the Roscrea group, which were adopted, were not only the most favourable to the Government but, in fact, constituted the only practical scheme for the achievement of the object I had in mind.
The Roscrea Meat Company, Ltd., was duly established and the factory which was originally built and equipped by that company and in which manufacturing operations were commenced in July, 1933, was of such capacity as enabled the company to deal with the number of cattle specified in the various agreements into which I entered, namely, a normal supply of 800 to 1,000 per week. Soon after manufacturing operations commenced it was found that the number of animals offered to the Department for supply to Roscrea was greater than anticipated and was much in excess of the normal weekly supply for which the factory had been designed and equipped and, as I mentioned in a reply to a question put to me by Deputy Wall on 16th February last, the company were asked to extend the factory and plant with a view to dealing with up to 2,000 cattle weekly. The directors agreed so to extend the factory, and estimated that the extension would cost somewhere about £16,000. At that time it was proposed that the Government should give the same terms, that is that they should lend three quarters of the money by way of debentures and the promoters would find the remainder of the money themselves. Towards the end of 1936, however, it became obvious that the supply of cattle was again going down—that we had over-estimated the numbers, or perhaps had not properly forecast the future conditions of such cattle, because prices were improving and it was more difficult to get the cattle as time went on. It was decided, therefore, at that time to compensate the company for the extension, and to ask the company to carry on with the original scheme, that is on the basis of 1,000 cattle per week. The company, in proceeding with the building and equipment of the extension, had acted in good faith, and in agreement with my Department, and I therefore had no option but to agree that it was only fair and reasonable to compensate them for the expenditure on structure and plant from which they could derive no benefit whatever. I should say when it came to the point of building this extension they found it necessary to adopt, walls of a more substantial nature, and also heavier constructional steel work than had been contemplated. They had to extend the steam raising plant by the installation of another steam boiler and a steam economiser, and had to install a complete new plant for one of the main processes. The expenditure instead of being £16,000 was actually £27,000.
From any advice which I got I am satisfied that the company were guided by expert advice, and that as regards the extension of the plant and machinery the directors acted in a prudent manner. An architect of the Office of Public Works has inspected the additional buildings and other items of a structural nature, and has reported on the charges that would in his opinion be necessary. I may summarise his report by saying that the extension was built in accordance with the plans submitted to and approved by my Department; that of a total expenditure of £10,149 on buildings proper he certified £10,004 as being properly chargeable against the new building. As regards other items of a structural nature which were undertaken in connection with the extension, he further reported that these were necessary, and were good value for the amounts set out in the company's statement of expenditure.
Two civil servants with accountancy qualifications and experience carried out a test audit of the items contained in the statement relative to expenditure on machinery and plant, and, as a result of their test, they were satisfied that the amounts so set out fairly represent the amounts shown as expended in the company's accounts. Incidentally, they reported that the audit of the company's accounts made in accordance with the requirements of the Companies Acts was very full and comprehensive. The discussions, therefore, between my Department and the company took place on the basis that the expenditure was £27,000, that is the figure set out in the company's statement of account, and which was as I said already verified. During those discussions my Department made the plea that part at least of the additional building was necessary to the original building; that even if they were now to deal with 1,000 cattle per week the factory was more efficient as a result of having this new part added; also that it had a replacement value in case there was any breakdown of the original factory, and that at worst at any rate it had a scrap value. The company, on the other hand, contended that it was no value whatever to them so long as they were dealing only with 1,000 cows, and that in fact it was an encumbrance to them because their overhead charges in respect of rates, repairs and renewals were thereby greatly increased. The Dáil will appreciate, therefore, that it was a matter of great difficulty to arrive at a settlement, but after protracted negotiations a sum of £15,500 as compensation for the expenditure on the extension has been arrived at between representatives of my Department and of the company. Having gone very carefully into all the figures, I am satisfied that the amount is fair and reasonable. This settlement provides, in effect, for a reduction of £11,500 from the original expenditure on the extension.
The second item deals with the cessation of the cattle supplies. As I have already said, when the promoters agreed to build the factory one of the conditions was that we would supply them with roughly 1,000 cattle per week. Towards the end of last spring there was a very considerable diminution in the numbers of uneconomic cattle offered for purchase by my Department, and finally I gave notice to the promoters of my intention to terminate my obligation for the supply of cattle to the company. There was a provision in the original agreement for such a contingency. As this notice was given within 36 months of the commencement of the factory, the promoters fall to be compensated under clause 1 (c) of the option agreement which I quoted in my reply to Deputy Wall's question on 16th February last. That clause provides that the compensation shall be a sum equivalent to 50 per cent. of one year's net profits of the company upon the average of the two years' working of the company, as shown by the books of the company, together with a sum not exceeding £5,000 subscribed as capital. On examination it was found that the net profits of the company for the period ended 30th July, 1936, as shown by the books of the company are £14,847, and those for the year ended 30th July, 1937, £36,966. The company's audited accounts showed that those profits were arrived at after making full provision for all administrative and overhead expenses, including managing director's salary, directors' fees paid or payable, and for depreciation of plant and machinery at the rate of 10 per cent. per annum, but account had not been taken of depreciation of the original buildings.
During the negotiations with the company, representatives of the Department claimed that a deduction in respect of those at the usual rate should be made, and this point was conceded by the company. As regards deduction in respect of income-tax and Corporation profits tax, I was advised by counsel that, while in his opinion I could not claim that income-tax should be deducted from the profits as shown by the books of the company for the purpose of the assessment of compensation, I was entitled to make a deduction for Corporation profits tax. On the same point the Company sought other counsel's opinion and were advised that neither income-tax nor Corporation profits tax should be deducted. After some negotiations, however, the company have agreed to waive that point, and now when we make deductions in respect of depreciation of the buildings and in respect of Corporation profits tax, the profits for the two years are £13,630 and £33,922, respectively.
Taking 25 per cent. of the total amount, the compensation due to the promoters, under the clause I have already quoted, would be £11,888, plus £5,000, that is, £16,888. On a previous occasion I was asked in this House whether before settling this item of compensation I could arrange for an independent audit of the company's accounts. My view is that under the terms of the agreement I am not entitled to insist upon that. I said, further, in reply to a question, that as the company's accounts had been audited by a reputable firm of accountants I did not think it necessary. As I stated already two officers who are civil servants, and who have accountancy qualifications and experience, did make a check of the audit of the accounts, and they were satisfied that they were presented in a proper manner. I should say also that the company has been assessed for income tax and Corporation profits tax on a larger profit than was actually shown us in the matter with compensation. The establishment and operation of the factory at Roscrea attained in great measure the objects of this scheme. It secured the elimination of 102,200 uneconomic cattle, which were mainly drawn from the mountainous and poorer districts. Many of these cattle should, in the ordinary course, have long since been eliminated under the Tuberculosis Acts, and compensation would be payable, at least on as high a scale as was paid for them when collected for Roscrea. I would like, whatever views Deputies may have on this particular deal that the Government made with this group, that they should not confuse the issue. The fact that we paid £2 10s., or £250,000, is a matter for the Government and the people concerned, and had no connection with, and was no benefit whatever to, the group who received it in Roscrea. In fact, if we paid £10 apiece for the cows, and that the scheme cost £1,000,000 in that respect, it would not have made the slightest difference to the promoters there.
When speaking of cows being diseased, I should like to make it very clear, both from the point of view of the promoters, and from the point of view of the veterinary staffs concerned, and from the national point of view, that not a single one of these animals was shown to be diseased on ante-mortem and post-mortem examination, and therefore were permitted to be used for human consumption. At the time the agreement was made one of the clauses in it was that the factory would not be permitted to sell edible products for human consumption in this country. That was not done from the point of view of public health or of disease but entirely from the economic point of view. All these schemes were promoted from the point of view of improving the price of cattle, and wherever a foreign market was to be found, in addition to the home market, we put the obligation on the company to find a foreign market for any edible products fit for human consumption, and to keep them off the home markets altogether. Some Deputies made statements to the effect that we were exporting meat not fit for human consumption. Well, if they did not want to consider the feelings of the promoters of the Roscrea factory, at least they should have kept the national point of view in mind. That meat was subject to very strict veterinary examination before being exported. The purchase of these cows and cattle at 50/- per head had the effect of enhancing the value of other cattle, because when we took all the cattle of lower value off the market, and removed that competition, naturally the cattle that came next in degree of inferiority increased slightly in value. That had the effect of increasing the price of cattle of all grades.
I should like to mention that meat meal was sold during the operation of the factory at a much lower price than otherwise would be the case. The meat meal was sold ex-factory by the Roscrea company for about £7 a ton. Prior to the starting of the factory the ruling price of meat meal was about £12 a ton and that would be in or about the price during these three years were it not for the operation of the Roscrea factory. Another good result was that the consumption of meat meal increased enormously during that time. The net effect is that roughly £58,000 was spent on the construction of premises and the provision of plant, while the total compensation paid to the promoters was £32,400, so that roughly there is a difference of £25,000 or £26,000 between these sums if you like to consider the plant, buildings and machinery that are now being left with the present company. I was warned on a previous occasion about the original agreement. The factory had to run for four years, and I had the option of taking it over on a certain basis, that is, by paying a fair value for the shares and giving a certain sum proportionate to the profits made. I was in a position to take over the factory from the promoters, but not until the end of four years. I was told when I mentioned that that I would be left with a dud factory on my hands. The Deputies who had that fear should, at least, be pleased to know that we are not taking over this dud factory, but getting rid of it on a basis of settlement. The Roscrea factory, of course, under present circumstances, does not appear to be a very desirable proposition for a new group to walk into. It might be difficult for any group to carry on business there on the basis of collecting uneconomic cattle at whatever price they could get them for making meat meal or to purchase other cattle for the manufacture of canned meat, but in a time of stress or war it might be a valuable proposition. I am informed, however, that the present company intends to reopen the factory and to resume operations, and if this agreement goes through they will resume so far as possible the employment given there during the last few years. From that point of view, it was important that this matter should be dealt with as soon as possible. At least that was one reason why I was anxious to have it taken in the Dáil before the adjournment, so that the present company could get back to working conditions, and have the factory going before the autumn comes round.