Dáil Éireann debate -
Tuesday, 23 Feb 1965

Vol. 214 No. 6

Committee on Finance. - British and Irish Steam Packet Company Limited (Acquistion) Bill, 1965—Second Stage.

Minister for Transport and Power (Mr. Childers)

I move that the Bill be now read a Second Time.

A greater measure of Irish participation in the cross-Channel trade has for long been an important objective of Government policy and has been the subject of debate and questions in the Dáil. Possible measures to achieve this objective were considered as long ago as 1938 but there have been certain fundamental difficulties. The trade was carried on by long established undertakings who possessed all the necessary docking and other facilities at both sides of the Irish Sea as well as the important business connections. It was obvious that for a new Irish company to break into this trade on a competitive basis would be a hazardous and costly undertaking even if they could secure satisfactory portal facilities. The alternative to setting up a new undertaking was to buy an existing undertaking or take a share in one and this was the solution which the Government saw to be inevitable from an early date. Possible arrangements of this kind were explored on a number of occasions over the years but for one reason or another did not come to fruition.

The agreement to purchase the B. & I. from Coast Lines is the result of exploratory contacts which commenced as long ago as 1960 and of detailed negotiations on the purchase which commenced in September, 1963. These negotiations have been carried on by officers of my Department in consultation with officers of the Department of Finance. A tribute is due to the senior officers of my Department for their labours in carrying out the negotiations involving many complex matters. They have advised me that throughout the protracted discussions they were met in a fair and reasonable way by the Coast Lines representatives, to whom a tribute is also due. The secrecy of the negotiations had to be preserved for many reasons, including the need to avoid speculation on the Stock Exchange and I think it fair to say that the secret was well kept. We have also had the benefit of the advice as consultant of a distinguished accountant, Dr. Howard Robinson of the firm, Polden Robinson & Co. Ltd., Dublin.

The B. & I. with its subsidiary, the City of Cork Steampacket Co. Ltd., is one of the two major cross-Channel companies, the other being British Railways. The company has a fleet of nine motor vessels including the large passenger/cargo/cattle vessels, the Munster, the Leinster and the Innisfallen. It operates regular passenger cargo and cattle services daily, except Sundays, between Dublin and Liverpool and thrice weekly between Cork and Fishguard as well as cargo or cattle services between Dublin and Liverpool, Dublin/Preston, Dublin/ Manchester, Cork/Fishguard, Cork/ Liverpool, Dundalk/Liverpool, and Drogheda/Liverpool.

The B. & I. carries a very substantial proportion of the regular cross-Channel trade. The report of the tribunal of inquiry into cross-Channel freight rates published in 1959 showed that the B. & I. carried about 45 per cent of the livestock traffic and, together with Coast Lines and Burns and Laird, carried some 56 per cent of total traffic. The B. & I. Dublin/ Liverpool service alone carried 24 per cent of total liner traffic. Broadly, the company's share of regular cross-Channel liner trade at that time appeared to be of the order of some 40 per cent. Up to date estimates of the proportions of traffic carried by the different companies are not available.

Apart from freight the company's passenger services between Dublin and Liverpool which handle about 250,000 passengers per annum and Cork and Fishguard which handle about 80,000 per annum are of considerable importance to our tourist trade as are the facilities provided for tourist cars on the Dublin/Liverpool route. The company employs about 800 regular staff ashore and 320 afloat, as well as giving employment to an average of over 300 dockers in Dublin and 50 in Cork and to a further 20 to 30 each at Dundalk and Drogheda on days when a vessel is loading or discharging there. The purchase will, therefore, assure complete Irish control over a very substantial sector of total cross-Channel trade.

The conclusion of the agreement to purchase the B. & I. is the result of protracted negotiations and very hard bargaining. Coast Lines Ltd. were prepared to enter into negotiations only on the firm understanding that the B. & I., if acquired by the Government, would continue to be operated on strictly commercial lines. Coast Lines have been given a firm assurance in writing that the B. & I. will be managed on commercial lines as a self-supporting commercial entity without special Government measures which would place it in an advantageous position as compared with Coast Lines other liner services and generally that it will not be operated in such a manner as to damage the legitimate interests of the Coast Lines Group. Coast Lines similarly have given an assurance that the companies of the Coast Lines Group will not be managed in such a way as to be detrimental to the interests of the B. & I.

It is very desirable also that other cross-Channel shipping companies whether Irish owned or otherwise should be assured that the company will be run on sound commercial lines and that they will not be exposed to unfair competition by a State-subsidised concern.

The Agreement scheduled to the Bill provides for the purchase of the entire issued share capital at a price of £3,606,922. This price is based on a valuation of the assets. The fleet was valued by a leading firm of ship brokers and valuers, Tamplin & Co. Ltd., London, who were commissioned by my Department, with the agreement of Coast Lines. Their valuation represents their estimate of the open market value of the ships of the fleet. The company's real property in Dublin was valued by Montgomery & Son Ltd., a Dublin firm of surveyors and valuers, who were commissioned by Coast Lines and the Commissioners of Valuation advised me that their valuation was acceptable. Other movable assets, such as cranes, etc. were taken over at book value.

The price of £3,606,922 also includes a sum of approximately £650,000 owing by Coast Lines to the B. & I. This sum represents the depreciation reserves of the B. & I. which have up to now been placed on loan at the disposal of the parent company. This sum will be repaid to the B. & I. by Coast Lines as soon as the exact amount is determined when the acounts for the year 1964 have been completed and audited. Certain assets listed in the Schedule to the Agreement have been excluded from the purchase and the value of these as shown in the books of the company at £202,277 must also be paid by Coast Lines to the B. & I. The purchase price, therefore, includes in all some £850,000 in liquid assets. No sum is included in respect of goodwill and the company is, therefore, being taken over at the estimated market value of the assets.

In accordance with normal commercial practice, interest is payable on the purchase price as from the date of Agreement, 2nd February, 1965 until the purchase moneys have been paid to Coast Lines. This cannot be done until this Bill has been enacted and the transaction completed. In the interval Coast Lines have agreed to appoint nominees of the Government to vacancies on the Board of the B. & I. so as to ensure that Irish interests will be represented until the transaction is completed.

The Agreement also provides for the conclusion of an Agency Agreement between the companies under which Coast Lines will be appointed the sole agent of the B. & I. in Britain and Northern Ireland. Similarly, there is provision for the conclusion in due course of corresponding agreements between the B. & I. on the one hand and constituent companies of the Coast Lines group on the other under which the B. & I. will continue to have the sole agency in the State for these companies. These agreements provide in effect for the continuation of the present commercial arrangements which exist between the companies subject only to such changes as necessarily arise out of the change of ownership of the B. & I. They provide for rates and terms of commission, etc. and specify the services to be performed by each company for the other. They ensure, inter alia, that the important passenger and cargo terminal facilities controlled by Coast Lines at Liverpool and elsewhere will be available to the B. & I. and that the B. & I. in its turn will continue to make corresponding facilities available to the Coast Lines group of companies including the passenger terminal and other facilities for the Burns & Laird Line at Dublin.

Among other arrangements provided for in the Agreement are the provision of relief vessels by Coast Lines to the B. & I. on the same terms as to the constituent members of the Coast Lines group. The availability of satisfactory relief vessels for the large passenger/cargo/cattle vessels the Munster, Leinster and Innisfallen is most important to the maintenance of the regular B. & I. services and such specialised vessels could not readily be chartered for temporary periods in the open market. The agreements are mutually beneficial commercial agreements between the companies and in accordance with normal commercial practice the detailed terms are being treated as confidential.

The purchase will be effective as from 1st January, 1965, and profits after that date will accrue to the Government. Profits up to 31st December, 1964, will, of course, accrue to Coast Lines. The Agreement provides for the payment of a dividend to Coast Lines in respect of the year 1964 limited to the net profit earned after deduction of all expenses properly chargeable to revenue and payment of tax.

Turning to the future, I must quite frankly dispose of any idea that the ownership of the B. & I. will result in dramatic changes in the cross-Channel freight rate structure. The accounts of the B. & I. have hitherto been incorporated in those of the Coast Lines group and have not been published separately. In connection with the negotiations, however, we had to get the separate audited accounts of the B. & I. for a number of years past. These reveal that the net profits of the company have been falling steadily. Profits after taxation which amounted to £184,000 in 1952 had fallen to £124,000 in 1956 at the time of the investigation into cross-Channel freight rates and to barely £2,600 in 1963. This was a particularly bad year for a number of reasons, however, and the profits for the year 1964 are expected to be of the order of £77,000 before taxation.

These profits are calculated on the basis of depreciation on historic cost and, in view of the very substantial increases in shipbuilding costs, depreciation at this level does not provide nearly sufficient reserves to finance the replacement of the company's vessels in due course.

Mr. Sweetman

May I interrupt the Minister? Do these figures include the figures for the subsidiary, the City of Cork Steampacket Company? They are amalgamated figures?

Mr. Childers

Yes. For instance, one of the large passenger/cargo/cattle vessels like the Munster which cost in the neighbourhood of £650,000 in 1948 would now be likely to cost from £1½ to £2 million to replace. The Dáil will appreciate therefore why it was that the Government were able to drive a hard bargain for the purchase of the company.

At this point it is desirable to summarise the general economics of cross-Channel sea transport, particularly in relation to the low profits of the B. & I. Deputies who have read the report of the tribunal of inquiry into cross-Channel freight rates will recollect the analysis made by the tribunal of the effect on conventional shipping services of the new specialised container and ferry services. The conventional services like the railways have operated a rates structure based largely on the value of the goods. The container and ferry services on the other hand have adopted the road transport system of charging according to the size and weight and loadability of the goods irrespective of their value. This has enabled the specialised services to compete with lower rates for the high value goods which the conventional shipping companies had hitherto carried at high rates.

On the other hand, the container services do not compete for low value goods on which conventional shipping freights are much lower and which in general are not in any case suitable for containerisation. Neither do the container or ferry services compete for the carriage of cattle or of passengers. While, in an effort to meet increased costs, there have been a number of increases in the general rate book levels of cross-Channel freights, actual rates charged on goods passing in regular and reasonably substantial quantities have generally been at exceptional rates settled with the shippers on a bargaining basis. In effect, the shipping companies carrying mixed cargoes have had to reduce rates in order to compete with the container services. They have also provided container services of their own, using either the conventional vessels or specialised vessels, but all these specialised services whether independent or not are inevitably in competition with the regular liner freight services. This competition from specialised container services has grown steadily in recent years. At present independent container services are operated daily between Dublin and Preston, twice weekly between Drogheda and Preston and thrice weekly between Greenore and Preston. The B. & I. itself operates a specialised container service between Dublin and Liverpool five times weekly and British Railways carry containers to a growing extent on their regular services.

The cross-Channel companies have had to face very substantial increase in costs which because of competition, customer resistance and public pressures, they have been unable to recoup fully by increased charges. Net freight revenue of the B. & I. which amounted to £547,000 in 1952 had declined to £396,000 by 1963. Over the same period expenditure had increased from £233,000 in 1952 to £493,000 in 1963. These increases in costs were largely determined by factors outside the control of the Company. Labour costs at sea follow international standards and for shore staff have been determined by national increases in levels of remuneration. Loading and unloading charges which amount to between 30 per cent and 40 per cent of the Company's total expenses are also to a considerable extent outside their control.

It will be well to recall the general conclusions of the Tribunal who reported in 1959 on the subject of cross-Channel freight rates that from the standpoint of the trading results it could not be said that the level of rates had been unjustifiably high but that a major criticism of the conference arose from its tendency to create a situation in which innovation entailing a possible disturbance of the existing pattern of traffic was discouraged so that its introduction might be gravely delayed. As I have already indicated, this is no longer the position and the rapid development of container traffic has precipitated a period of rapid change in the cross-Channel trade and of difficulties for the major shipping companies operating regular liner services.

It would be helpful to Deputies if I make it clear that comparisons between individual freight rates on different routes are in general most unrewarding. In comparing individual freight rates on the cross-Channel services with rates for similar goods on routes elsewhere the following factors have to be taken into account:

(1) The overall costs of maintaining regular services on the route including such factors as seasonality, balance of trade in each direction and the cost of terminal facilities at the particular ports used.

(2) The rate structure obtaining on the route, i.e. whether rates are determined by class or by such factors as cubic weight and loadability.

(3) The quantities of particular goods and the regularity with which they pass over the services and whether a package deal or exceptional rate has been negotiated with the particular shippers because of the volume of business.

Examination by my Department of complaints made from time to time did not establish that rates in any particular case could be regarded as excessive. Even where comparisons with other routes showed lower rates for particular commodities than on the cross-Channel services, it was found that differences in circumstances arising out of one or more of the factors I have mentioned made the comparison invalid. The only valid comparison that can be made between freight rates on the cross-Channel services and comparable services abroad is on the basis of the profitability of the undertakings, assuming reasonably efficient operation in both cases. The trading results of the B. & I. which are now available to us make it clear that on this criterion it cannot be argued that the freight rates charged by the company have been excessive.

The cross-Channel shipping trade is in fact at present in the throes of a period of rapid evolutionary change which in some respects is comparable to the position which was brought about in inland transport by the competition of road with rail. On the one hand the conventional shipping companies operate regular liner services for passenger/cargo and cattle which must operate on a regular basis irrespective of short-term variations in the volume of traffic. They likewise carry all goods offered just like the railway. On the other hand, the specialised container services compete only for what is to a great extent the cream of the traffic and do not provide services for other goods. While the analogy with road and rail competition is helpful in understanding the nature of the changes that are going on it should not be carried too far. Shipping companies will fortunately not have to cope with competition from small units comparable to privately owned lorries or motor cars. The prospect is that over a period of some years the character of the cross-Channel shipping services and the freight rates structure will be modified by the various factors I have mentioned.

Our ownership of a substantial part of the cross-Channel services over these critical and formative years will help to ensure that the changes carried out and the ultimate structure of the services which emerge will be such as to reflect Irish interests. The B. & I. will in these matters be the watch dog of Irish interests.

A further important consideration is that in a situation in which the B. & I. profits were diminishing rapidly outside interests might not be prepared either to meet heavy temporary losses or to incur substantial new capital expenditure, if that were necessary, in order to maintain and improve the services so as to ensure their adequacy for our trade. The services operated by the B. & I. are most important ones, both for our trade and for tourism, and it is essential to our interests that they should not be run down or disappear. Were that to happen, the Government would in any case have no alternative but to step in and measures taken at a later stage might be much less effective or more expensive than taking over the company now.

The company will be run on commercial lines and there can, of course, be no question of substantial freight reductions or discriminatory action in favour of Irish trade which would in any case be contrary to our international commitments. Moreover, it should be remembered that shipping is an important business in its own right and that freight earnings are the precise economic equivalent of export earnings. Even if it were possible to do so, it would not make economic sense to accept heavy losses on our shipping services merely to provide a general and unselective subsidy for a part of the cross-Channel trade carried by the services and over the routes of one particular company.

The Irish company will be requested to examine all the factors and elements which together constitute the basis for a nationally orientated commercial policy. Since this old-established company is coming under new management and control, it will be desirable to outline them briefly:

(1) An analysis of the cross-Channel merchandise freight market. This involves some assumptions as to the growth of trade over the next ten years—its content, related to the detailed analysis prepared for the economic programme; its division between merchandise suitable for containers or pallet and for other means.

(2) The same examination in relation to livestock and a critical analysis of the cycles in cattle exports—the possibility of smoothing out the cycles and of changes in the volume of exports.

(3) An analysis of the present-day traffic and its content related to method of packing, use of unit loads, the available cargo space, the frequencies of sailings, onward road and rail services and destinations.

(4) The evalaution of efficiency and productivity in regard to all the above elements of study, in turn related to the handling at the ports, movement of merchandise from port to ship, the stowage of cargo and utilisation of space, the costs of ship operation, the costs of maintenance, the keeping of clerical records, accountancy, stock control and so forth.

(5) The examination of the passenger traffic facilities in respect of tourists and Irish people coming on family visits, both in relation to amenities and to future potential. This study would, of course, extend to the very vital contribution of the B. & I. to motor car traffic to and from Ireland.

(6) The examination of the sales organisation.

There is a whole complex series of problems, referred to by consultants and by experts, connected with joint marketing, the amount, size of consignment, packaging, and how exporters can secure lower transport costs by more careful examination of their procedures under every head.

(7) Those elements having been examined, the company would base its conclusions and decisions on the following general principles:

(i) The provision of the most economical, efficient service to advance the trade of the country.

(ii) The assessment of commercial viability.

(iii) The continuation and further development of the best possible communications and relations with the staff at all levels in order that growth of productivity may be fully understood and linked with conditions of employment and monetary reward.

May I make it absolutely clear that the new Board will inherit a respectable tradition of competence in freight handling. Relatively few complaints have come my way on the freight side. A few complaints have been evident in regard to the second-class passenger facilities. Considerable improvements have been made in the last two years and this year further improvements.

The new Board will, I am certain, be able to effect progress, although quick results cannot be expected. The staff will, I am sure, work together with the object of demonstrating that a wholly Irish owned and managed cross-Channel shipping company can show the same spirit of endeavour as, for example, the cross-Channel national airline has already done. For this there must be enthusiasm on all sides.

I have thought it well to give a realistic report on the present shipping position so as to dispel all talk of subsidies. On the other hand, I should like to affirm my confidence and that of the Government that under wholly Irish direction and management, and with the assistance of modern management and other techniques and the support of the trading community, the B. & I. can render services to the community with greater efficiency and satisfaction and, in due course, provide a reasonable return on the investment we are now making.

Mr. Dillon

We do not propose to oppose this Bill. It is better, I suppose, if the shipping company has to be purchased, that it be purchased into Irish control than as so frequently happens in respect to other enterprises in this country which pass into foreign hands. At the present time a great many activities which heretofore have been controlled here in Ireland are passing under foreign control and essential transport facilities between this country and Great Britain cannot, with any degree of satisfaction, be seen to pass under foreign control owing to its indispensable character from the point of view of the entire trade of this country not only in industrial but in agricultural exports as well.

The Minister, in his introductory speech, has offered us a variety of bases for valuing the assets we have taken over. There are two matters to which I hope he will return when concluding. One is the reference he has made to the profit record of the company. When you are buying a shipping company, you do not buy a parcel of scrap; you buy a business. It is no use having a fleet of ships if the company that supplies them consistently loses money on them. The company is worth very little in those circumstances from the point of view of a correct valuation for fixing a reasonable purchase price.

The attention of the House should be very specifically directed to what the Minister has said on page 6 of his introductory speech. The profits of this company have been falling steadily and though they amounted to £184,000 in 1952 and to £124,000 in 1956, they were barely £2,600 in 1963. Those figures must be read in the context of the statement that these profits were calculated on a basis of depreciation on historic costs and in view of the very substantial increases in shipbuilding costs. The Minister's statement is that depreciation at this level does not provide nearly sufficient reserves to finance the replacement of the company's vessels in due course.

The Minister points out that the valuation of a ship like the Munster has been based on a figure of £650,000 as its historic cost, whereas its replacement cost today would be between £1½ million and £2 million. Therefore, it would be franker of the Minister to say that on the basis of depreciation, the losses sustained in recent years are probably far higher than the alleged profit of £2,600 which he speaks of for 1963. On the figures in this statement, it is apparently true that this company, on a realistic basis, has been losing very large sums of money during the past few years, if correct depreciation had been provided for in the accounts.

The Minister tells us the ships have been valued by a firm of ship valuers, the name of which he gave us. Their valuation exceeds the open market value of the ships of the fleet. I remember when our Government were in office, the question of the acquisition of this line arose and I think an opportunity was offered to us to acquire it. At that time our capital commitments were mainly directed to the building of houses, schools, and to other social investments of that kind, and, as we considered these matters had a high priority over all others, we devoted the capital at our disposal at that time to such social investments. I do not remember what the price was at that time.

The Minister has had the advantage of consultation with his valuers and so forth and assures us that the price of £3,606,922 is an advantageous price. He describes it as a hard bargain. There are many people in the world who, if they had a company which was losing on a realistic basis a growing annual sum, would not consider they had been made the subject of a hard bargain if they got £3,600,000 for an enterprise which was in fact a heavy drain on their resources.

This company, the B. & I., is, I understand, a subsidiary of the Head Line who are getting out of shipping and going into other transport activities in Great Britain. This £3,606,000 which they are getting for the assets fits very well into their programme of activities in Great Britain. I hope that our experience in operating this property will give us some return for the money we are investing in it. I think I am right in saying that if we were to meet the interest charges on this capital investment, we would have to earn approximately £200,000 a year at six per cent. At present the company is losing a substantial amount of money every year, so while the Minister says no question of a subsidy can possibly arise, I hope that does not suggest that our purchase of this line is a signal for an increase in freight charges between here and Great Britain.

Mr. Childers

The accounting has been done in the conventional way and the company has not been losing money.

Mr. Dillon

The Minister has pointed out that the account keeping has not made provision for depreciation on a replacement basis and that it has been making provision for depreciation and arriving at a profit and loss figure on an historic basis. The Minister pointed out that in respect of one ship the basis on which depreciation has been calculated hitherto was on £650,000, whereas its replacement will cost between £1½ million and £2 million. These are not realistic——

Mr. Childers

The depreciation figures are based on the usual conventions for shipping.

Mr. Dillon

Whatever the conventions may be, the Minister will agree with me that if you proceed on the basis that your replacement cost is £600,000 when you know it to be somewhere between £1½ million and £2 million, then whatever convention demands, realism suggests that what appears to be a profit of £2,306 is in fact a very substantial annual loss.

We are all aware that just prior to the announcement of this bargain, the B. & I. made an announcement that they proposed to raise freight rates by 7½ per cent on all freight except livestock. The Minister would up his statement tonight by saying that there must be no question of a subsidy and that this line must be operated on an ordinary profit and loss basis. I do not think that operating a State enterprise of this kind need necessarily involve the earning of a profit but the price paid for it ought to permit of its earning at least a realistic depreciation on its assets and such sum as will at least pay the interest on the capital borrowed to effect the purchase.

That is a very moderate standard. It is unreasonable to ask a State corporation of this kind, operating an essential service such as a cross-Channel transport service, to pay not only the interest on the capital borrowed but to provide a sinking fund and depreciation fund at the same time. So far as I am concerned, if the line is in a position to obtain a realistic depreciation provision and pay the interest on the capital borrowed it will be doing what was required and what was essential for it to do, but if it does less, there is no use talking about not providing a subsidy because every year it makes a loss involves a subsidy from the Exchequer—if the line is not paying the interest on the capital invested in it, having made depreciation suitable for the replacement of the ships as that necessity may from time to time arise.

I do not think it necessary to emphasise to the Minister how vital it is that the cost of freight between here and Great Britain be kept at the minimum. The livestock industry is particularly susceptible to any serious alteration in the freight rates for livestock between here and Britain. Of course, the same is true of all our industrial exports. A great many people forget one of the very material and substantial handicaps under which our industrial exports operate. If you are operating an export industry in a country like Great Britain which has immense shipping facilities of a regular scheduled type to all ports of the world, you can ship your goods to the appropriate port and thence they can proceed to almost any part of the world. If you manufacture on the continent of Europe, you have at your disposal the same portal facilities as are available in Great Britain but you have the immense additional advantage, if you want to ship any parcel of goods, large or small to any place between Calais and Vladivostok, that you only have to stop a train and attach a wagon to it and it threads its way over the rail systems that operate over the whole continent of Europe to its ultimate destination. And that is not having regard at all to the vast waterways of Europe which provide the same kind of convenience in duplicate for those who are fortunate enough to have ready access to them.

I often remember in my time as Minister for Agriculture one of our great difficulties, if we wanted to send livestock or a variety of other commodities abroad, was that it was not infrequently necessary to arrange our shipment on the basis of a chartered ship. I remember when we used try to send seed potatoes to destinations on the Continent or in Africa, they had to be assembled in Derry or in County Donegal, and sometimes from more distant places, and the chartered ship would arrive on a particular day and the potatoes would be loaded aboard and sent to their ultimate destination. I also remember the extraordinary complications that attended the shipment of meat. You had to charter a refrigerated ship in order to take meat from this country to a continental destination and not infrequently to get the ship was in itself a very formidable problem and almost always the chartered party had to provide not only for the ship proceeding to the destination whither you wished it to go but due allowance had to be made for it to return to whatever area it habitually traded in. All these problems arise from our peculiar geographical position. If we were in a position to say that every industrial producer could quote his goods for foreign markets at an f.o.b. price Liverpool the advantage to industrial exports from Ireland would be incalculable.

So far as the livestock trade is concerned, that is fated to be mainly with Great Britain for forseeable time but it is a matter of immense importance to us that we have a rapid and satisfactory service to expedite the delivery of our livestock to the British market. By and large, the character of the service provided up to now by the steamship line has been reasonably satisfactory. It has not always been true that the subsequent transport available in Britain for our livestock has corresponded in quality with that made available by the shipping line. I hope the company now being established will concern itself with the provision of transport and with seeing that a corresponding transport will be available at ports in Britain for our Irish livestock.

The Minister has told us that a valuation has actually been made of the ships, and of the freehold and leasehold property of the company we now acquire. There is not set out in the Minister's statement a schedule showing precisely what these assets are. It would be of material interest to the House if the Minister could provide a schedule describing the assets we have acquired. On the face of the Minister's statement, it does not appear, from the actual assets of the company or from its earning capacity, that the bargain we have made represents as many advantages as the Minister appears to think. The company is losing money at a pretty substantial rate. The ships have had a long life and some will soon fall due for replacement which will involve a substantial additional capital investment if we are to make the company viable. Has the Minister any realistic hope or belief that this company will be able to pay its way without increasing freight rates to provide realistic depreciation on its assets?

I do not think it unreasonable to remind the Minister of the innumerable occasions on which he assured us that they had fine schemes for the development of Córas Iompair Éireann on a strictly economic basis into a viable enterprise that would pay its way. All these optimistic forecasts have fallen by the wayside and we are now told that an annual subsidy of £2 million is necessary to keep Córas Iompair Éireann in existence. That experience imposes on this House the duty of seeking to extract from the Minister an honest estimate of what he contemplates the real experience of this company is going to be.

However, we recognise on this side of the House that the Minister's estimates of the profits of the company are such that an assessment of the possibility of the line being carried on for very long on that basis would have to be made. They would scarcely continue to operate at a loss but it is recognised that if the ownership of the line is to change, it should change into Irish hands rather than into foreign control over which we here would have no control and which might involve us in a burden of freight rates which would be extremely inimical to the vital interests of the country.

The Minister has sought to give us certain forecasts with regard to the assets of the company but I would be obliged if he could schedule these assets and let us know what they amount to. It is not clear to me whether the B. & I., as at present constituted, has any freehold or leasehold property in Britain or whether the port facilities belong to the parent company.

Mr. Childers

The parent company.

Mr. Dillon

Whom do we propose to deal with regarding these port facilities?

Mr. Childers

We have a contractual agreement with Coast Lines over a very considerable period for the wharfage and all the other rights at present exercised by the B. & I., subject to various permanent rates being decided on.

Mr. Dillon

These are complex matters and it is not possible for me to give any informed forecast as to what the economic position of the company will be but it looks to me that if the Minister's estimate is correct, the last profit margin in 1963 was £2,600 and that it has since improved to £77,000 before taxation, but, on the basis of historic depreciation rather than replacement depreciation, we are buying a company which is losing money heavily annually.

How do we propose to meet the interest charges on £3,600,000 out of a company which is already losing money heavily without a subsidy is a complete mystery to me. I am utterly at a loss to understand how the Minister founded his peroration honestly on the facts he set out in his opening paragraphs. Before the debate concludes, he ought to tell us how he expects to meet the interest charges out of the profit and loss account of a company which, according to his own figures, has been losing a very large sum of money every year for the past five years.

Mr. Kyne

The Labour Party welcome this move. It is one we have long considered desirable. We have always believed that there should be at least part Irish control of the services we need between Great Britain and this country. The Minister made a lengthy, detailed Second Reading speech and it is almost impossible for anyone to come to any hard and fast conclusion so quickly after such a long speech. Indeed, we must take on trust what the Minister said because it is impossible to determine whether it is completely accurate. I am sure it is as accurate as he could make it but it would take a good deal of time and consideration for us to make up our minds as to whether we have got half a bargain or no bargain at all.

When the railways ceased to be profitable, those who were running them got rid of them, even though the needs of the country demanded the service. The railways were still essential to the industrial and agricultural life of the country and we had no option but to take them over. If the situation here is identical, then again we have no option. In the national interest, we must take over the service. Our record in Irish Shipping—we had to go hastily into shipbuilding during the war years—has been a good one. We have held our own in competition and that should give us confidence in our ability to find the people necessary to service the ship or manage shipping in general. I believe we can do the job as well as, if not better than, the B. & I. did it. Whether or not we will show a profit is another matter. We will have to do the best we can. There is plenty of scope, if not for reducing freight rates, certainly for improved services in relation to passengers. As far as second-class passengers are concerned, the situation has been lamentable. I have said before in this House that cattle are transported under better conditions between Great Britain and Ireland than human beings are, particularly at peak periods. With very little extra expense, we should be able to provide deck chairs at least during peak periods so that women and children will no longer be required to sit on the deck or on their personal luggage.

The Minister did not advert to an increase in air freight between Great Britain and Ireland. It is pretty clear that lack of passenger traffic has been one of the reasons for the failure of the B. & I. service. The Minister made no reference to air freight traffic or to how that traffic has affected the position or may affect it very seriously in the future. It would be interesting to know if his Department have made any inquiries in that direction as a guide to them on this question of whether or not we are right to purchase, or whether, in fact, sea transport will decline to a point at which it would be absolutely necessary for us to secure some line to safeguard our national interests.

As I said, the Labour Party welcome the Bill because we feel it is time we held these things in the hands of the Irish people to be utilised in the interests of the nation as a whole.

Mr. Donegan

It is quite clear we must have a good freight and passenger sea service between Great Britain and Ireland. We know now that this company was running down. It would be unwise of us to denigrate the company but we must be realistic in our approach to this matter. The company was running down largely because of the greatly increased costs of shipbuilding. It was not possible to set aside reserves to ensure replacement. One may take it, I suppose, that the company were glad to sell; but, if they were glad to sell, there was a necessity for us to buy. I am glad we bought this line because I believe this will give us an opportunity to bend this company to the good of the country and to the good of our exporters, both agricultural and industrial. We now have an instrument we can bend to our will and that will is represented in the will of the people of Ireland and their good.

I was rather disappointed by the Minister's statement that he must, quite frankly, dispose of any idea that the ownership of the B. & I. will result in dramatic changes in the cross-Channel freight rate structure. First of all, I think the House must agree with the Leader of the Opposition when he says he will be quite satisfied if the service is bent to the good of the country. That would certainly achieve the best result. We must take it from the Minister's statement, however, that in the foreseeable future, there will be no dramatic changes.

I should like a situation to develop in which certain traffic would be encouraged, traffic which might be uneconomic in the first six months but which would become economic, or almost economic, after a certain period, the whole purpose of the exercise being to expand our exports. I am visualising a situation in which vegetables grown in North Dublin and along the east coast would be transported to centres such as Lancashire and Northern England generally. That would create a market for goods we can produce in great profusion. Agricultural production represents 80 or 90 per cent of our net exports, calling for no imports in return other than perhaps fertilisers and such goods.

I do not think the Minister has been sweeping enough in his approach. He should have been more sweeping. He should have said he would invoke the co-operation of every Department of State so that every opportunity for placing our industrial and agricultural goods, particularly perishable agricultural goods, on the vast British market would be a primary consideration in the development of this company. There is necessity for change. The difficulties the company has had to face show that there is necessity for change. These people had a duty to their shareholders to produce the greatest net profit in any financial year. Towards that aim their efforts had, of necessity, to be bent. It was not their job to go out and try to create traffic, to think of industrial and agricultural expansion, to charge a rate for a particular li = "2" fli = "-1"service which they knew was too low but which they hoped would by volume pay for itself.

If we examine what has happened over the past few financial years and look at it from the point of view of the Irish producer, we see there must be an opportunity for change. I hope this opportunity will be taken by the Minister. It is far too early for anybody to be hypercritical about it or to say in relation to the Minister's speech that he has not got this in mind. I am sure he has and we wish him well. However, it is our job to remind him that these opportunities are there and that it is his duty to take full advantage of them.

Mr. Corish

Deputy Kyne, on behalf of the Labour Party, has already welcomed this move to acquire the B. & I. Company and I merely want to endorse what he said. However, there are a few remarks I should like to make on the Bill and on the Minister's speech. It is a good thing the B. & I. is now in Irish hands. Deputy Dillon did not wax eloquent on it, but he reminded us that there were far too many foreigners buying land and public firms in this country. I trust this will be one of the first moves by the people of Ireland to begin to own a substantial portion of it again. The Minister may have his difficulties, but I cannot see why this venture should not be a success.

Deputy Kyne referred to the awkward period during the war when, due to the initiative of the then Minister for Industry and Commerce and some of his officials, and particularly other individuals engaged in the shipping industry, Irish Shipping was established. The whole House will agree that has been a very successful venture. As far as I know, Irish Shipping can complete all over the world. Of course, it has its peak and valley periods, but, by and large, we should all be extremely proud of Irish Shipping and of the people associated with them for the past 25 years. There is one aspect of this matter about which I am somewhat concerned, but I trust the Minister will be able to allay the fears I have. As the Second Reading speeches of Ministers are wont to do, the Minister's speech did not deal with the Bill in detail. I do not think the section needs explanation, but, before I go on, I should like to know a little more about section 4, which reads:

(1) The Minister for Finance may hold for so long as he thinks fit the shares of the Company acquired by him under this Act and, after consultation with the Minister, may, as and when he thinks fit, sell or otherwise dispose of all or any of such shares.

(2) The net proceeds of a sale by the Minister for Finance of shares of the Company shall be paid into or disposed of for the benefit of the Exchequer.

There are many Acts of Parliament in respect of the establishment of the Irish Sugar Company, CIE, Bord na Móna and the 40 or 50 other semi-State companies we have. Is there any similar section in any other Act of Parliament establishing a semi-State body? I hope this is not the thin end of the wedge the Minister for Finance spoke about 12 months ago.

Mr. Childers

This clause is put in in respect of Irish Shipping and Irish Steel, for example. It is a conventional phrase and gives the Minister for Finance ultimate power of disposition.

Mr. Corish

It gives him ultimate power to put the B. & I. on the public market. Is that interpretation correct?

Mr. Childers

It has never been used in that way. It gives him ultimate power of disposition. He must have ultimate control. He owns the shares.

Mr. Corish

This says specifically that the Minister for Finance, in consultation with the Minister for Transport and Power, may in another six months' or six years' time put the company on the Irish market and sell it again. If that interpretation is correct, I would be violently opposed to it. The Minister for Finance indicated to the House that the Government were thinking in terms of putting on the public market shares of the other successful semi-State companies. That is not good enough. We are taking over the B. & I. at a time of adversity, at a time when it is assumed the profits will not be as high as they were in the past five or ten years; but if this company is to be a success in the future and make a profit, the State should hold on to it and any profit accruing should be for the benefit of the State.

Mr. Childers

There is no intention to sell the company in a short time. This is a provision that apparently is generally inserted in this kind of Bill. Because the Minister is the shareholder of the company, he must have some right to dispose of the shares. That is all it is. It is a kind of convention always put in.

Mr. Corish

Would the Minister say is there such a section in respect of the semi-State companies for which he has responsibility?

Mr. Childers

There is one in respect of Irish Shipping Limited.

Mr. Corish

But not in respect of the ESB or Bord na Móna?

Mr. Childers

I could not say that.

Mr. Corish

We are not going to vote against the Second Reading, but the Minister should be prepared to tell us a little more in his concluding remarks, and particularly on Committee Stage.

Mr. Childers

Bord na Móna and the ESB are not constituted in the same way. They are statutory companies, not limited companies.

Mr. Corish

The fear the Labour Party have is that the Minister for Finance, in consultation with the Minister for Transport and Power, could just dispose of this without any reference to the Dáil. I do not say all our semi-State companies have been a success, but, by and large, they have been, and we are all proud of them. There should not be any clause by which the State could relinquish its interest in these companies without reference to the Dáil. The Minister says there is no intention to do this, but so long as this is contained in an Act of Parliament, and particularly in view of the stated intentions of the Minister for Finance—which we presume are the intentions of the Government— there is a danger. As far as the Labour Party are concerned, we should like to be assured on Committee Stage that the fears I have expressed are groundless.

The Minister has appointed a number of directors. Perhaps he would be able to tell us when he will appoint the remaining directors—I think there are three. All the semi-State bodies in recent times have got Irish names— some of them unpronounceable, not alone for the Minister but for me as well. I am wondering whether or not the new company will continue to be called the B. & I. Company.

Sir Anthony Esmonde

I should like to say at the outset that I think the Government are right to try to get into cross-Channel shipping. Even though they have bought a company of which I shall have some criticism to make later on, at least we have got into the pool and will be in a position from now on to have some say in regard to freight charges. Heretofore the position has been that, in proportion to other charges, cross-Channel rates have been the highest in the world. I was told recently by an industrialist that he could ship a machine to the Far East at a rate only 20 per cent higher than the rate charged to take it to England. Therefore, it is a sensible move the Government have taken.

I listened very carefully to the Minister's statement and he read it clearly and distinctly. He always speaks distinctly, which is not the case with all Ministers. He gave us a long statement pointing out the advantages and the assets we were taking over from the company but there is a tremendous amount of information missing. We are told that we are getting three major ships, the Munster, the Leinster and the Innisfallen. We are not told the age of these ships. I take it that they were laid down some time about 1948. We are told that a certain value was included for them in the assets of the company. It must be borne in mind, when assessing the value of an asset, that maintenance often costs a great deal of money. We have no information from the Minister as to whether or not these ships have had a recent refitting. I suggest that if those three ships have to be refitted, that in itself will place a considerable burden on the new company. These are matters on which the House will require information.

The Minister is quite frank in regard to the trading figures. These figures are not completely divorced from the trading figures of the Coast Lines Company as a whole. Of course, Coast Lines Company is an enormous shipping company. The statistics that have been produced for us give the figures for the B. & I. in association with the whole shipping company and it may very well be that Coast Lines may have been subsidising the B. & I. Company. We have no information on that point. That may or may not be the case. The Minister has stated that separate figures were not kept for the B. & I. Company.

I do not know whether the purchase price is reasonable or not. I am sure the Government struck as hard a bargain as possible but it is true to say that we are purchasing at a time when shipping companies find it almost impossible to make a profit. It is possible that with the reorganisation necessary to meet the needs of this country, profits will show an increase.

There is an enormous number of Irish emigrants working in the north of England. In view of the fact that they have a five-day week, these people would like to return to Ireland for weekends to be with their families. It would be necessary for them to make the return journey on Sunday night so as to be at work on Monday morning. The B. & I. have never run a Sunday night service. If the workers to whom I refer returned for the week-end, as we hope they will from now on, they would lose a day's work if they were unable to return to England on the Sunday. Cross-Channel traffic could be built up if facilities were made available for week-end travel, not only at peak seasons but throughout the year.

The B. & I. will now be a State company. Deputy Corish had qualms that the Government might sell the company. I hasten to reassure him. There is no chance of their selling this company for the money they paid for it. I am not saying that they made a bad bargain. I am saying that it is only the State that could afford to buy a losing concern.

Undoubtedly, in its present financial state, this company will have to be subsidised by the State. Possibly, in time, profits may accrue. I have already made one suggestion as to how passenger traffic might be developed and it is possible that the major part of our cargo shipping will be transferred as far as possible to an Irish shipping company. Against that, it is quite possible that the Minister may find that he will have to come back to the House for the next few years for more money to keep this company going. While saying that, I would reiterate that the Government have done the right thing, something which should have been done a long time ago. For a long time I have had the view that we were completely at the mercy of those providing cross-Channel shipping and in view of the fact that so much of our trade—far too much, in my opinion—is with the United Kingdom, it was essential that we should acquire a shipping service.

The B. & I. will be a State-controlled company, even though a board of directors will be appointed. Will we have, in this case, the same situation as we have in the case of other State companies, that if Deputies conceive it to be their duty to raise questions in the House if they consider that things are not being done as they should be done, they will be debarred from doing so? In view of the heavy State investment of nearly £4 million, will we be in a position to ask questions here if we consider that things are not being done that should be done or that certain transactions are being carried out? I should like the Minister to reply to that point and satisfy the qualms I have. I wish the company luck. As I have said, its purchase by the Government is something that should have been done years ago.

Mr. Rooney

Like the previous speakers, I welcome this move on the part of the Government because it will provide an Irish-controlled cross-Channel service. The speech the Minister made this evening was very limited. It did not give a very clear picture. The facts set out may be quite true but the statement is significant rather for its omissions than for the information it contains. As Deputy Esmonde has said, no business concern would have purchased this service in the hope of making a profit from it but it was a good set-up and, from the national point of view, it seems to have been good business to purchase the B. & I. Company, lock, stock and barrel, as has been done.

It is clear from the Minister's statement that Coast Lines Ltd. was the fairy godmother of the B. & I. Company and that it was on Coast Lines that the company relied for its continued existence. So long as it had the support of Coast Lines Ltd., it had some prospect of continuing but without Coast Lines, Ltd., it cannot be operated as a profitable unit. However, it has, in my view, a great potential. We have a considerable livestock export trade and we have not reached the stage when livestock will be transported by air and we must depend on ships for the transport of livestock. There may be a movement from the shipping of livestock to the shipping of carcase meat but then again it is the heavy type of commodity and it will probably be a better paying proposition to send it by ship rather than by air. Therefore, if we set up this service for the transport of our livestock on an efficient basis, there is a lot in its favour.

Our livestock traffic on this service is almost 50 per cent of the total livestock traffic from this country and it is possible with some adjustments and some improvements in the service, that a higher percentage, or almost 100 per cent of the livestock traffic will be sent out by this new shipping service. This essential cross-Channel service is unlike the trading service provided by Irish Shipping Ltd. which trades around the world from port to port and is not limited to service between this country and Great Britain as it appears this service will be.

The purchase of this concern at a price of £3,600,000 means that it will be essentially a nationalised concern, that the State will have a big say in the financing of its operations. I had hoped that when the Minister and the Government begin to get full control of this service and put it on an efficient basis, they will not allow it to get into the situation which CIE is in at the moment, coming to the taxpayers every year for approximately £2 million in order to keep it going. When a service is nationalised, it means that a public service must be made available, whether it is profitable or not. That is why CIE is losing. It is compelled to provide services which are not paying their way in relation to those services which do. We should try to avoid that if we can, because, if not, the taxpayers will be subscribing towards maintaining this cross-Channel service, in addition to CIE.

There is a limit which could be applied in the form of freight rates. If the freight rates rise beyond an economic level, then the exporters will probably find other ways of avoiding the heavy cost of these freight rates. Freight rates should be on a competitive basis, first of all, and, secondly, limited to the loading capacity of the existing fleet of ships.

We have seen here that the profits of this concern dropped from £184,000 in 1952 to a mere £2,600 in 1963, a drop of over £180,000 in the space of 11 years. For some reason not explained in this statement, there has been a rise in the profits between 1963 and 1964. No doubt we shall be able to get that information from the Minister at a later stage, but if there is an upward trend now and things go back to the level of 1952 where there was a profit of £184,000 on operations, that is very much in its favour. On the other hand, if there was something unusual which caused the profits to rise from £2,600 up to £77,000 from 1963 to 1964, it should be made known.

The ships we have taken over with this service, generally speaking, are not suitable for container traffic and it may be necessary to adapt them for that purpose, because that is the trend. There is a movement more and more towards container traffic because of the efficient handling and loading, apart from other considerations arising in this connection. Therefore, we must face the fact that if the existing ships are not suitable for container traffic, they should be adapted as far as possible so that it will be possible to deal with this traffic on an everexpanding basis.

This purchase has been made in the face of the fact that there is a very big surplus of shipping tonnage in the world at present. However, the advantage of having an Irish cross-Channel service is very important and it strengthens the case to be made in favour of its acquisition.

I notice also that in the space of 11 years the net freight revenue fell from £547,000 to £396,000 in 1963. That again was a fall of approximately £150,000. I have no doubt that the losses there could be shown in the increases in freight revenue from air traffic. I think the trend in the future will be air transport of goods which are suitable for that type of transport. On the other hand, we cannot see that in the future air transport of heavy goods will be a profitable occupation and we must fall back on shipping for this purpose. Air freight will be selective. Certain classes of goods will be suitable for air transport and others will not. Our shipping service can take advantage of the type of goods which cannot be appropriately transported by air. We must face the fact that if exporters find it economic to use air transport, they will switch over to it and move away from the shipping service. The shipping service will find it necessary to be efficient and competitive and to be ready to deal with the heavy goods traffic which will be offered to it instead.

A very useful suggestion was made by Deputy Esmonde when he said that an attractive passenger service should now be made available. I agree with him that if transport across the water were cheap, it would attract our Irish emigrants, approximately a million of them, to bring revenue to this country by coming in for a week-end or part of a week, now that they are working a five-day week in Britain. Irish Shipping Limited is mainly a trading concern and would not be affected to any extent by the operation of this service. It is strictly a cross-Channel service.

As a nationalised service, the B. & I. will be offered the non-profitable type of traffic, in addition to the type of traffic which will give a profit. That aspect of it will make it difficult for the company to make ends meet. On the other hand, the exporters themselves decide on the profitability of sending goods by air. The selection in this regard is made by the exporters rather than by the people operating the air freight services.

The Minister, while he has not got a modern outfit of modern ships, has at least got a viable set-up which it will be within his power, and the power of those appointed to the new board, to put on a profit-making basis. There seems to be a large staff involved here —1,200 people, in addition to about 300 dockers. That gives an idea of the magnitude of the service with which we now have to cope and it would be a good idea if the operating tactics and business methods used by Irish Shipping Limited were adopted by the new company. Irish Shipping has proved itself to be a very efficient undertaking and if we could bring to the B. & I. the tradition of Irish Shipping and its approach to the services provided, it would provide a good working basis.

At the very outset consideration should be given to the provision of an extremely cheap passenger service. In the past good travelling conditions for passengers were not available in these boats. We ought now to be able to provide a good passenger service within the framework of this new company. It is all very well to have passenger accommodation available in cattle boats but we should try to swing over to modern conditions and modern accommodation in certain of them and, on the other hand, to adapt the other boats so that they can deal with heavy goods traffic and livestock freight. I welcome the Bill but I feel that the Minister's statement was brief in relation to the implications with which we will find ourselves faced when we come to consider the Bill at a later stage.

Mr. Clinton

It is a good thing that we should get into the cross-Channel shipping business and this was the only way in which we could have done so. It was well known that we were anxious to get in and it was well known that this was the only course open to us. Consequently we have got into it in the most expensive way. Deputy Rooney has referred to the fact that the ships are not particularly suitable for container traffic and the whole trend now is towards container traffic and that type of quickly transported traffic. We probably have got ourselves a number of Model Ts but that was not avoidable and we will find ourselves in the near future confronted with heavy expenses in re-equipping these vessels or replacing them if we are to keep up with modern trends in the transport of goods, particularly perishable goods.

The great advantage I see in this sphere is that it gives us complete control of the delivery of our goods to their final destinations. We had considerable complaint in the past about delays and about our goods arriving in the British market not in the best condition. We have had endless complaints about the manner in which passengers have been treated and after all the criticisms we have levelled at the B. & I. in the past, we have something to do now to show that an Irish-owned company can do much better. If we were prepared to criticise others, we should now be prepared to do something about it ourselves.

I should like to hear more details regarding the agreement entered into with Coast Lines Limited. I was not able to follow the matter very clearly but I thought there was some clause which curtailed our activities or which curtailed the development of this shipping line. I hope I am wrong in imagining that we are now not in a position to spend considerable sums in modernising this shipping service and bringing it up to a standard sufficiently high to enable it to compete with any other similar shipping line. I should like to hear from the Minister that the terms of this agreement do not in any way curtail our efforts to enable this company to provide a modern and competitive shipping service.

Mr. Coogan

It is a good thing to see another link in our friendship with our neighbours across the channel, coming after the hands-across-the-Border effort. I regret that this expenditure of £3 million shows that the Minister has an east coast mentality. After his blunt refusal to the people of the west who want to develop shipping in the future, he is now doing a half-baked job and is a disgrace to his Department——

Mr. Childers

Can this matter of Galway harbour be discussed? It has nothing to do with the Second Reading. The Deputy is making a scandalous statement.

An Leas-Cheann Comhairle

The Deputy did not mention Galway harbour but I would point out to him that this is a specific Bill dealing with the B. & I.

Mr. Coogan

I said——

Mr. Childers

The Deputy better keep quiet.

Mr. Coogan

I have stung the Minister into admitting that he has an east coast mentality.

Mr. Childers

Galway is getting a splendid harbour and the Deputy knows it. I will not listen to his rubbish.

Mr. Dillon

I hope the Leas-Cheann Comhairle will put some manners on the Minister.

An Leas-Cheann Comhairle

Deputy Coogan, on the Bill.

Mr. Coogan

I am pointing out the mentality of the Minister in spending £3 million overnight when for 14 years we have been fighting to get a few thousand pounds.

Mr. Childers

That was not my fault.

Mr. Coogan

Now the Minister has the chance. The tide is running out as far as the west is concerned. Now you should try to save the west instead of damning them. That is what the Minister is doing.

Mr. Childers

Apart from the unwarranted intervention by Deputy Coogan, I want to thank Deputies for the very kindly and warm welcome they have given this Bill. Before I proceed any further, I should like to make it clear in case there is a wrong impression created in regard to the increase in cross-Channel freight rates that the company has announced limited increases. In the case of the B. & I., their port to port rates are being increased by 7½ per cent and their through rates by four per cent. This will not apply to cattle, motor cars or unit load container services. British Railways are also increasing through rates by four per cent but a decision has not been taken about port to port rates. I understand that the other steamship companies are keeping more or less in line with what the B. & I. have been doing. I wanted to make quite sure that nobody will say that the B. & I., which is not yet under the control of this country, are putting a straight across the board 7½ per cent increase on freight rates. It would be unfair to them if that were not made clear.

First of all, I want to deal with Deputy Dillon's observations. I am glad he asked me these questions because I think I should elaborate further on what I have said already. Under present commercial practice, the extra depreciation required in order to meet current replacement costs has to be met with capital; in other words, by the difference between historic depreciation and replacement costs. The B. & I. allowed for replacements at historic costs and that is the conventional pattern of accountancy for shipping companies as far as I know all over the world. It would be unfortunate if it went out from this House that the B. & I. has in fact been making a commercial loss in the ordinary sense of that term understood by rival shipping companies and by shipping companies of all kinds. That is not to say that the B. & I. will not have a problem in the future of providing the extra capital of replacement costs. We must keep to some conventions in respect to accountancy in connection with shipping companies. That still does not take away from the difficulty that when the B. & I.'s new Board have examined the fleet, they will have to consider what modernising is required in what period and what capital will have to be raised somehow for the provision of any new ships or the improvement of existing ships.

Deputy Dillon asked whether I could give the price of individual ships. I do not think that would be wise because it would affect the future saleability of these assets if the Board decided to dispose of some and replace them, or even not replace them. If I were pressed, I could give the total valuation of the fleet and the valuation of the remaining property but I would prefer not to. All these matters relate to a company that has to operate commercially but if the Deputy wishes, I will send him details of the difference of the valuation of the ships and the valuation of the remaining property if he thinks it would be of use.

Mr. Dillon

I am much obliged to the Minister but information given confidentially is of no value to me.

Mr. Childers

I understand that. In regard to the price we have paid, I do not think we could do much better than to buy the B. & I. for what is, in fact, reckoned by a very reputable firm of valuers as its break-up value. Even with a company making heavy losses, let alone a company merely earning low profits, we could hardly hope to purchase at less than the break-up value of the assets. I think it can be said we made the very best bargain we could for a company that has had fluctuating fortunes and has recently been affected by the change-over to containerisation and palletisation and which had to adapt itself to new circumstances.

Deputy Dillon posed a very interesting question. He asked whether I was prepared to say that the B. & I. would be able to earn the interest on the capital invested in it. I really think I must depart from the precedents set by my distinguished predecessors, on both sides of the House, who have been prepared, in matters involving transport economics, to make very optimistic prophecies in regard to what a State company can do. The Deputy referred to the optimistic predictions made in connection with CIE in 1944, again in 1950, again in 1955, and the reasonably optimistic predictions made in 1958, though the Minister for Industry and Commerce at the time covered himself to a considerable degree. I prefer to say that because of the revolutionary change that has taken place in the pattern of transport across the Channel and because B. & I. have not undertaken the very elaborate inquiry into the whole operation of the company which will be carried out by the new directors, I would not like to make a prediction in regard to this.

I have appointed directors. I shall appoint three others, who are the very best I can find and I hope they will exercise the same initiative, the same understanding of their job as has been the case with Aer Lingus and Bord na Móna, and will examine all matters affecting the company to the utmost of their ability to see it through the changes taking place and evolve a freight rate system which is commercially viable and that as a result we will have a profitable company.

I cannot guarantee they will succeed. I simply say I wish them every luck. The pattern of cross-Channel transport is changing considerably, the methods by which goods are taken across the Channel will change through the use of container traffic and unit loads. There are changes in the character of our cattle exports which I hope will improve as time goes on, if the present demand for beef continues. It will be impossible to predict whether by a certain date the profits of this company will provide sufficient depreciation to buy new ships and a sufficient profit to discharge the sum the Minister for Finance will have to find in interest for the purchase of the shares.

Maybe the B. & I. will have better luck if I wish them luck and direct them to undertake in very great detail and with great assiduity all the obligations I outlined in paragraphs 1 to 7 of my statement. That is a mountainous job for a new company. I am not saying some of that work has not already been done by B. & I. Some of it, in relation to certain procedures, has been undertaken. Now the company will be owned by the people of this country, it will have to consider exclusively Irish needs for imports and exports. It will not be just one branch of a very large British company. Some policy decisions of the new directorate will undoubtedly be different from those reached if the old board were in existence and, quite rightly, were working in the interests of a large company embracing a wide range of activities. There should be changes to the advantage of importers and exporters and also to the advantage of the financial position of the company.

Mr. Dillon

Does that leave any meaning at all in the Minister's statement in the last page of his speech that there can be no talk of subsidies?

Mr. Childers

It depends on how you use the word "subsidy". What I meant by "subsidy" was that under the terms of our agreement with Coast Lines and as a member of OECD, we are absolutely prohibited from deliberately undercutting rates for the sake of assisting a particular export, knowing we would have no hope of paying depreciation or interest on capital. The shipping companies know what it means—that you can engage in package deals with individual companies for regular dispatch of guaranteed sets of commodities. It means you could make allowance for special situations that might arise in the case of a given export where the freight rate is of critical importance. That is distinct from absolutely frank rate cutting. I cannot go into it in any greater detail.

Mr. Dillon

The Minister's observation is addressed more to OECD than to Dáil Éireann.

Mr. Childers

It is simply that we are members of the OECD and as such do not indulge in specific rate discrimination.

Deputy Esmonde asked for the age of the three large ships. They were built in 1948. He also asked about the relationship between the accountancy of the B. & I. branch of Coast Lines and Coast Lines themselves. We had a very expert accountant examine the position of B. & I. and we have found no evidence that Coast Lines either subsidised or milked B. & I. The company operated on its own strict basis and Coast Lines neither milked away the profits nor did they subsidise the company.

He also asked what would be the position in regard to questions asked on the general conduct of B. & I. It is quite obvious that I could not disclose in the House the rates offered by B. & I. for any specific commodity because that could be of direct assistance to their many competitors on the route.

I can give all the information possible to reflect the progress of the company and, on the occasion of the annual Estimate, I shall give as far as I can answers in a general way to questions which might be regarded marginally as concerning day to day administration which will help Deputies to understand the problems of the company. I shall also take account of any complaints made to me and refer them to the company in the usual way. This company, as I have said, is in heavy competition with other companies in the Channel and to have detailed discussion in the House, involving the giving of detailed information to members of the House, would obviously be most unwise. The company must be left to run along strictly commercial lines.

In further reply to Deputy Esmonde, the value of the ships took into account their age, their condition and the value they might be expected to fetch on the open market. Therefore, the question of whether they had a major refit or otherwise at the time of purchase does not enter into the picture in the sense that it would be included in the valuation made by the valuers. If a ship had been refitted and a sum of £37,000 or £40,000 had been spent, that would be taken into account in the prevailing market rate for the ship as calculated by the valuers.

Deputy Corish asked about the clause in the Bill whereby the Minister for Finance can dispose of the shares as he thinks fit. I agree with his views. This is a conventional phrase being put into a number of Acts such as those governing Irish Shipping and Irish Steel Holdings and I agree it is inconceivable that the Minister for Finance could, in spite of what is in the Bill, sell the B. & I. over the heads of the Oireachtas, without the consent of the Oireachtas. It is a conventional section and I will ask the Minister for Finance whether, possibly on Committee Stage, we might have some amendment to indicate that in connection with the disposition of the shares the Dáil would naturally be given full information in regard to the matter. I think the Minister for Finance the other day, if I remember rightly, said he would not make use of the Act which enables him to dispose of State companies without giving a full account to the Dáil, and I am sure that will equally apply in this case. I shall inquire with regard to the position.

In reply to Deputy Corish, the remaining directors will be appointed after the enactment of this legislation. Three still remain to be appointed when this legislation is enacted. Deputy Corish also asked whether we intended to give an Irish name to the company. That might be considered later on but, for the moment at least, because the B. & I. is so widely known, it would be a disadvantage, I think, to make use of the change of ownership in order to change its name. That is a matter that would more properly arise later on for consideration.

Deputy Donegan raised the question of whether the new B. & I. could engage in what might be termed speculative low rates for certain classes of goods in the hope that their production might increase. It would be very difficult to answer that question. The Irish company would, I think, be entitled to examine the position in regard to any commodity in which there was quite clear evidence that a very high rate was curtailing its export; if they genuinely felt they could get a very good package deal, which would call for a lower rate and result in further development of the product and, therefore, increased exports, they might be entitled to consider that. I must, however, make it quite clear at the same time that they cannot deliberately cut rates and lose money on specific transactions.

Deputy Donegan also asked whether the various State organisations can help the B. & I. The answer is, of course, that the B. & I. has got to make its own evaluation of its position, as I have already indicated, but the exporters of this country can discuss problems with the B. & I., if they so wish, all sorts of measures designed to enable them to transport their goods at a lower cost because the company are making use of new procedures in regard to containerisation and palletisation in relation to the volume of a consignment sent at a particular time and that, no doubt, will aid the B. & I. because very often what is cheaper for the exporter will also be more economic for the B. & I. It all relates, as I have said, to the marshalling of the goods and the size of the consignments, the method of packing, the carriage of unit loads and so forth. Changes in procedure are possible as a result of collaboration between the B. & I. and the exporters of this country. Córas Tráchtála is, of course, always available to give such advice as it can on this matter. Advice is also given by Shipping Services Ltd., which is an ancillary body to Córas Tráchtála and which has offices in Liverpool and helps some 150 shippers here to obtain the best possible rates. There are a number of institutions all engaged in this technical examination at present in relation to the dispatch of goods. I hope, as a result of the B. & I. becoming an Irish company, all these organisations or institutions will spring into even greater activity, now that they know there is this new company which will devote its activities to providing the very best possible service for Irish exporters and Irish importers and which already has a huge proportion of the total trade and should, therefore, be able to make even greater progress.

Deputy Rooney asked whether the B. & I. had adapted the fleet to containerisation. The answer is that the Meath was built with a view to taking both cattle and containers. Some other ships have been adapted for this purpose and the question of further adaptation will arise for the new board to consider. The B. & I. carry containers to Manchester and Liverpool. Deputy Rooney also asked about air freight. That is expanding very rapidly but it is still a very insignificant proportion of the total weight of goods coming from and going to Great Britain. So far as passengers are concerned, I think the air companies, BEA, Aer Lingus and the others, carry something between 35 and 40 per cent of the total passengers across the Irish Sea. There is ho and growing competition and the B. & I. will have to look to its laurels and see what can be done in the way of modernisation. Deputy Rooney suggested, too, that there should be a cut in fares in the second class to encourage more of our people who work in England to come back here on holidays. The position is that cross-Channel vessels are absolutely packed to capacity during the time at which most people like to take their holidays. There would be no point in reducing fares during that period but it would be up to the B. & I. to consider what they could do to encourage people, by making such changes in the fares as as they think worthwhile, to travel mid-week and in the periods of low pressure. They can undertake experiments to see if a reduction in fares would encourage people to travel not on Fridays and Saturdays to the country and Mondays and Tuesdays from the country. That has been the pattern in regard to people taking holidays here.

Deputy Clinton had some sharp criticism to offer of the conditions under which cattle travel on the B. & I. boats. I do not know whether he was really referring to conditions on the boat or elsewhere, but I must say I have not had much complaint, as Minister for Transport, in regard to the conditions under which cattle have been transported by the B. & I. and I was glad to learn that Deputy Dillon had not heard any such criticisms either. I hope the conditions can be improved and further modernised.

Deputy Clinton asked about the agreements made with Coast Lines in relation to their agency for the B. & I. in Liverpool and so forth. I must make it clear these agreements are absolutely private. Coast Lines insisted on that. I am satisfied the agreements are good ones. There are satisfactory arrangements for revision of the agreements. There are arrangements for arbitration in certain cases. But these are private agreements.

Deputy Clinton asked also about our competing with Coast Lines. I made it perfectly clear in my speech that we would continue to operate the B. & I. on strictly commercial lines. That means we will not deliberately cut rates in a way that could not be regarded as on a commercial basis. We have also agreed we cannot compete with Coast Lines on the routes on which they run ships at the moment. That was another part of the agreement. As Deputy Clinton knows, however, the B. & I. has a number of different services. It has a number of different ports to which the ships travel and it certainly offers plenty of scope for developing trade, certainly plenty of scope if the services can be modernised and attuned to Irish needs for the purpose of assisting exports and also developing the economy of the company itself. I have, I think, answered all the questions that were asked. Once more, I thank the House for the welcome Deputies have extended to the decision of the Government to purchase the B. & I.

Mr. Dillon

Can the Minister tell us now, or on some future occasion, with what lines will the B. & I. be functioning in competition?

Mr. Childers

The Dublin-Glasgow line, Burns & Laird, the Bristol Steam Shipping company and British Railways. There is a service of containers by the Atlantic Steam Navigation Company.

Mr. Dillon

Plying between Dublin and British ports?

Mr. Childers

Plying between Dublin and British ports.

Question put and agreed to.

Committee Stage ordered for Wednesday, 3rd March, 1965.

The Dáil adjourned at 10.30 p.m. until 3 p.m. on Wednesday, 24th February, 1965