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Dáil Éireann debate -
Wednesday, 24 Nov 1971

Vol. 257 No. 2

Fóir Teoranta Bill, 1970: Committee and Final Stages.

Sections 1 to 3, inclusive, agreed to.
SECTION 4.

I move amendment No. 1:

In subsection (1), page 2, lines 19 and 20, to delete "the Minister" and substitute "Dáil Éireann".

Perhaps we could take amendment No. 2 with No. 1 as they are related.

Perhaps the most important part of this Bill will be its memorandum and articles of association. It is in those documents that the title of the Bill will be defined in some detail. As this company, which is to be set up, can be a company of prime importance in the industrial life of the country it is essential that this House, which will be providing the finance for the company, should see exactly what type of company it is proposed to be set up. All that I am asking is that the Minister would let the Parliament see the memorandum and articles of association. As the Minister knows, it is within these documents that the personality of the company is formed and the details of its modus operandi will be set out, and, in view of the later amendment by the Minister where the borrowings may go to the very substantial sum of £7½ million, it is only proper that the Dáil should see the memorandum and articles of association.

With regard to amendment No. 1, Deputy Cooney's proposal is that the memorandum of association should be approved by the House rather than by the Minister. I am sure the Deputy is aware that it is standard practice that the memorandum of association of a State company should be approved by whichever Minister is directly responsible in each case. In no case that I am aware of are these memoranda subject to approval by the Dáil.

I would invite the Deputy's attention to section 4 (2) (a) of the Bill which already delimits the contents of the memorandum of association by prescribing what the principal functions of the company will be. The remaining provisions of the memorandum should only be regarded as being of a subsidiary nature and really governing the general functions of the company under the Companies Act in relation to its day-to-day business. Accordingly, the memorandum cannot contain any provisions of significance which are not already before the House in section 4 (2) (a). Any change in the substance of the memorandum would require the consent of the House by way of legislation amending section 4 (2) (a).

In regard to amendment No. 2, which is a similar case but relating to the articles of association of the company, again, it is standard practice to have the articles of association of State companies approved by the Minister responsible for the particular company. Again, I am not aware of any example in which it is subject to approval by the Dáil.

As the Deputy knows, the articles of association prescribe the regulations for management of the company and, in form and content, they will be consistent with Table A of the Companies Act, 1963. As the Deputy knows, they do such things as spell out the rules attaching to the appointment and the powers of directors, arrangements for company meetings, transfers of shares, and that kind of thing. I think it is important to remember that these items are not concerned in any way with company policy and, therefore, I do not think it serves any useful purpose to require the approval of the Dáil for the articles of association. These are simply rules governing the day-to-day operations of the company and I do not think it would be appropriate for Dáil Éireann to become involved in the running of a company at that level. For these reasons, I am not disposed to accept the amendments proposed by Deputy Cooney.

I am not at all taken by the argument that I hear so often, relying on precedent, because the precedent might not be sacrosanct. It could be a bad precedent. Indeed, I can imagine companies which could come before this House where there would be no point in the memorandum and articles of association coming here. But a company of this nature which, it is proposed, should have borrowing powers of up to £7½ million and which will be of vital importance to the industrial life of the nation, cannot be compared with the precedents the Minister speaks about and the fact that, in the past, the memorandum and articles did not come before the House is no argument why they might not come here on this occasion.

The other point made by the Minister was that the objects are already set out in section 4 and that section 5, if you like, gives the circumference of the articles of association and that the presence of these two sections renders the detailed memorandum and articles of association unnecessary. Again, as I pointed out on the Second Reading, what is rather unsatisfactory about this whole Bill is that the commercial philosophy behind it is hazy. In what way is it different from the ICC? How will it operate in relation to the way Taiscí Stáit was operated?

I thought, perhaps, that if the detailed memorandum and articles of association came before the House, where we would have the full objects and the full articles of association and, in particular, its powers to go in to rescue companies and the type of company that is to be rescued in relation to section 4 (2) (b), it might be of assistance to the Minister and informative to the House and the taxpayer to see precisely what sort of company was being set up.

Amendment, by leave withdrawn.
Question proposed: "That section 4 stand part of the Bill."

In regard to section 4 and section 5, like my colleague, Deputy Cooney, I fail to see what difference there is between this Bill and Mergers Limited as operated by the Industrial Credit Company. Undoubtedly, section 4 does define the circumstances in which a company might expect to receive assistance. I am not a great Gaelic scholar but it appears that the translation of Fóir Teoranta is "Rescue Limited".

"Assistance".

What did the Minister say?

"Assistance".

Would the Minister prefer to take "assistance" as the translation of "fóir", rather than "rescue"?

I would not quarrel with "rescue" because that is the basic idea behind it but I am informed that the accurate English rendering is "assistance".

I asked some excellent Gaelic scholars on this side of the House who, in my opinion, are a bit better at the language than the Minister. They thought "rescue" was closer to the meaning than "assistance".

We will not argue about that.

I also understood it was "rescue".

I went to my more learned friends, as far as Gaelic is concerned, to get the exact meaning because that might be a clue to the thinking behind it.

There will be plenty of need for rescue. Under the Anglo-Irish Free Trade Area Agreement and with the freeing of trade in the EEC and, as the Minister for Industry and Commerce on the Imposition of Duties Bill last night and on his Estimate made quite clear, there are various areas, particularly textiles, footwear and joinery, where there will be serious difficulty and need for rescue.

The question then arises as to whether section 4 is, in fact, doing anything more than could be done and probably would be done if things could move fast enough under the aegis of the Industrial Credit Company.

Inter alia, the objects of the company shall be under subsection (2) (a) (i):

to acquire, hold and sell, assign and otherwise deal in shares and debentures issued by concerns satisfying the Company that they are eligible concerns within the meaning of this subsection.

This subsection has been foreshadowed by statements made by prominent young bankers over the last six months and the thinking by these prominent young bankers is that one of the good things that should happen in businesses which may find themselves in difficulty would be that the bankers, instead of extending normal overdraft accommodation, or, as they announced about a year ago, term loans plus overdraft accommodation, should take shares in the company and place on the board of the particular company a member of the bank. One has to consider then in relation to this rescue operation, if such a procedure were to occur, what the result would be if a director of the company was also an employee of the bank which provided perhaps all the liquid capital being used in the company.

He would be sacked by the bank.

It would not reach that point because the bank would sell them out before they reached that point.

We must discuss this seriously. In the last six to nine months it has been suggested at various management seminars and elsewhere that more positive action by particular State institutions was required and they prophesied the arrival on boards of companies of representatives of banks. I suggest that, if a representative of a bank became a director of a company and that bank was the bank which provided all the liquid capital requirements of the company, an absolutely dictatorial position would be created. The companies could be merged together if, for instance, two banks so decided; they could be merged if one bank happened to be the banker for the same company as the other bank and something could be made viable with, perhaps, a lower employment content. That would be a pity particularly where two companies, if there had been individual help for each company, might have been capable of continuing on their own and becoming viable.

Deputy Cooney interjected to say that the bank representative on the company would be sacked by the bank. This might not be the case. If one reads the balance sheets of companies, the profit and loss and the trading accounts one finds that a number of companies, in order to rationalise and become ready for free trade, have had to spend very large capital sums and these capital sums have impinged on their liquid resources to such an extent that the liquid resources are, as to a great proportion of them, borrowed from the banks. Out of that has grown term loan ideas and, following on that, the idea of placing directors of the banks on the boards of companies. That might appear to be a very good thing from the point of view of the person outside looking in in the belief that the person who pays the piper should call the tune.

Here I want to sound an open warning. One can take this strong Manchester School of Economics line and make something pay but, in the process, one can also destroy employment and the possibility of increased employment in the future. It is for that reason I want to sound a note of warning. I agree absolutely that there is need for the service provided in this Bill. I have grave doubts, however, and I think the Confederation of Irish Industry would join with me in this if I read their weekly circulars correctly, whether this Bill is the answer. It is introducing yet another agency. We have at the moment the IDA and the ICC. There are four different sections of the IDA operating on four different fronts. The ICC operates on five or six different fronts, including Mergers Limited. The latter is doing work which would parallel the work of Fóir Teoranta. Then there is Córas Tráchtála advising on marketing prospects and so on. One begins to wonder whether or not section 4 should have produced something like the rescue operation devised by the last Labour Government in Britain; one agency did everything.

The Deputy has in mind the IRC.

Quite so. As far as I understand it, the Tory Government is rather sorry that, because of ideological differences, they got rid of the IRC and it is possible within a very short period they may restore something like the IRC. As I interpret this Bill, this is not something like the IRC. It is provided in section 4 (2) (b) (vi) that where failure to receive financial assistance would have serious repercussions either nationally or locally then Fóir Teoranta would carry out its operations. I am glad to some extent that this is in the Bill because it is an open secret—there is no point in denying it though the practice has been to deny it—that an entity of 500 to 1,000 people working in one company is regarded as a social and political entity and efforts are made to keep such an entity operating, efforts far and beyond the efforts made to keep an entity of ten here, another entity of ten there and another entity of ten somewhere else viable. I have in mind the small joinerv factories in Navan in Deputy Tully's constituency. A much greater effort is made to preserve employment in large units. This section seems to me now to say quite openly that if a large company gets into serious trouble it must be helped; even if it can be made viable for some years it must be helped and the employment potential must be preserved.

It is not proper to give instances where this was done in the past, but there is one instance which can be given because it was so public and there was no denial or disagreement about it, namely the position of Erin Foods before they became Heinz Erin. The disagreement at that time between General Costello and the Government was that he said this particular company had to lose a large sum of money for approximately five to seven years before it became viable and showed a profit. What happened was that halfway along the line everybody got cold feet and baled him out. That is an example of where help should be extended.

This section indicates to me that, if a company employing 1,000 people is going to close, one is not going to be able to open the Industrial Development Authority report and see what grant is given to that company. It would be quite clear to me, as a politician and businessman, that the grant given for the purpose of keeping a large number of people employed in a particular constituency is inordinate. If the same number of people were scattered in different companies in several constituencies they probably would not receive the same degree of help from the Minister and the local politicians. I welcome this procedure but I would say that this should be done not only as a commercial operation but as a social operation as well.

My advisers were correct in saying that the word "rescue" is more appropriate than the word "assistance" because it means that this Bill will come into operation when the continuance of a company is in doubt because of inability to obtain its financial requirements from commercial sources. There are very many good companies which have nothing wrong with them at all except a lack of capital to make them viable and modern enough to compete in the vast market into which we are going to enter. As far as the ordinary banking institutions are concerned they are not a commercial risk but, with the claims made on banking institutions by the Government for its Capital Budget— and nobody is against building houses —the fact is that the commercial banks do not have enough money to go round. Where it is clear that a company will not be able to continue because it cannot get an overdraft from a commercial bank, and where it is clear that it is not going to be a constant loser, then subsection (2) (b) (v) of section 4 is a good one.

Subsection (2) (b) (iv) of section 4 reads:

it has reasonable prospects of profitability on a permanent basis, whether as for the time being constituted or after adaptation.

The forecast from Government agencies such as the Industrial Development Authority is that we shall have double the number of redundancies we had last year. One cannot go much further than to say that one can go in on a rescue operation when there are reasonable prospects of profitability.

Subsection (2) (b) (iii) reads:

the proportion of the promoters' contribution to its total capital is reasonable,

I wonder what the definition of this will be? I wonder whether the position of subsection (2) (b) (vi) which reads:

its failure to receive financial assistance would have serious repercussions either nationally or locally.

will have an effect on the decision of the board as to what would be a reasonable contribution as a proportion of the capital from the promoters?

It is inevitable that this board will have a great deal of political pressure put upon it. An extraordinary amount of pressure will be put on this board to save companies. In section 5 we find who appoints the members.

Subsection (2) (b) (ii) reads:

the employment and capital employed in it are significant,

This means that large companies can look for succour but smaller ones cannot. I cannot find anywhere in the Bill a rescue operation designed for the small company. When the effects of the reduction of tariffs and duties in the EEC struck hard in Europe it was amazing how many of the small companies managed to survive, but there was also the sad fact that a number of them did not survive.

I am not happy with this Bill in that it will only enter a rescue operation if the employment and capital of the company are significant. I can think of many a small company employing 15 or 20 people who might go to the wall in free trade conditions because it did not have enough liquid capital. In order to improve production and the quality of the product such a company might have had to use its liquid capital to buy expensive machinery and equipment. No provision is made for the 15 or so people employed in such a company but those 15 people could be duplicated, triplicated and multiplied all over the country in small units until such time as their removal from employment might have a far more serious but far less spectacular and far less political effect than the effect of the closure of a large company.

In subsection (2) (b) (i) the words, "(including any activity ancillary to industry)" are included. I can think of several companies where activities ancillary to the industry should be considered. I suppose the making of component parts would be considered an industry anyway and so no problems arise there.

I have already dealt with the question of the holding of shares. There are two sides to this question and the Minister will have to consider both. One is the change in banking policy over the last year with which I am not enamoured but I might be one of the unfortunates who would have to look for a few pounds from them and I do not know if what I am saying here now would help me. I am not entirely enamoured of the suggestion by banks that they would have considerable shareholding in Irish companies.

I regard the banking institutions as institutions to provide a service with wisdom and I regard them as highly paid for that service. For that reason, this company, which must get its money from somewhere, would be more acceptable to me if it did not go in to hold shares but rather held debentures. After all, one of the things we have in this country is a high degree of honesty and integrity among chartered accountants and auditors.

We have just said we hope so.

That is the point. It is quite unusual to find a case where the certified accounts of a company are, in fact, incorrect unless the auditor was "codded" or imposed on. I would prefer if this company did not interfere in the activities of industry but rather that the company would go in to take bulk debentures and make secured loans. In relation to short term finance, including bill finance, this is a highly important matter.

The market in discounted bills in this country, in relation to the amount of business done, is ridiculously small by British standards or any other standards. It is common practice all over the world, as far as I know, that people use discounted bills. The people who purchase goods very often pay for them by discounted bills, which are countersigned by the sellers. They are usually three months or six months bills which give the purchaser a period of either three or six months to sell the goods and, having done so, to have the money to meet the bills when that arises in his bank. The seller of the goods has pledged his faith in the purchaser by countersigning them so that when the bills arrive in the purchaser's bank, if there are no funds there to meet the amount, they will go, as ordinary cheques would go, back to the seller of the goods.

It is a good provision if this company is to provide any volume of bill finance. I believe that it will further affect the trend that has been occurring in the last year or so, particularly with the commercial banks which came into this country in that, if there are facilities available from this company, even though the rescue operation seems to be in all the time, it will encourage institutions that came from abroad to further extend their excellent facilities on discounted bills. The provision on guarantees is a good one. I may have made a disjointed contribution on section 4 but I felt that there were details in it which had to be dealt with in detail and there were things which had to be said. I hope I have said them as clearly as I could.

I want to bring a couple of points to the Minister's notice which he might have an opportunity of clearing up for me. The Bill has already been dubbed the SOS Bill.

The what?

The SOS Bill.

May day has arrived.

Yes, May day has arrived for a lot of companies and the trouble about it is, as I said on the Second Reading, that companies have a habit of waiting until an SOS is the only thing which can rescue them because they have gone too far. Does the Minister consider that companies which have already got into trouble before the passing of the Bill can be rescued? Will this Bill have the power to deal with companies that have already got into serious trouble and had to close down within the last few months? I pointed out to the Minister, with regard to the point made by Deputy Donegan, the apparently contradictory statements in the Minister's brief where he referred in one place to the fact that there would have to be substantial investment and substantial employment and, in the second place, where he said that it was hoped to help smaller concerns. I would like if the Minister could say what he considers a small concern because in small towns in rural areas this is a very important factor.

Could the Minister say, when the Bill is passed, if the company will be able to assist a firm which has closed down and if the workers in that firm feel that they can take over and make the factory work? Can this Bill assist them if they can produce the necessary evidence to convince the company that they are in a position to make the factory viable again?

We spoke about worker participation and all the rest of it. I have in mind, particularly, instances where workers have received a considerable amount of redundancy pay. They may either emigrate because there is no other employment in the area, have their fare paid from their redundancy fund, or club together the whole lot, invest the money in the factory and feel they can make a go of it. If that is so will the company be in a position to assist them?

Reference was made yesterday to the question of footwear and we are all very much under pressure from people who are employed in this industry to see if something can be done to help it. I have an idea that the footwear industry is one which has been blacklisted by the Department who say that there is very little they can do for it. I would like if the Minister could clear that point for me. If that is not so I would like if he would state so because this is very important to the people engaged in this industry.

At the present time the furniture industry is coming under very heavy pressure. Deputy Donegan referred to the small factories in Navan but big factories are also beginning to suffer. We had the case of a large factory in the town closing after a succession of small ones had closed down. There are a number of other factories and if any more of them go the position will be very serious. Could the Minister say whether or not anything can be done to try to prevent the import of cheap furniture from abroad, not necessarily from Common Market countries?

In the clothing industry the exports of some of the factories are suffering badly because the British firms which formerly took clothing are now no longer taking it as they have made a deal with some of the east European countries. They have gone in there, taken over a factory and, with the State subsidising the production, they have been able to buy the finished article very much cheaper than it can be produced here. Is the same thing happening with regard to the furniture industry? Is the reason the furniture industry is getting knocked down here that countries are, in order to keep their exports, subsidising heavily the export of furniture to places which were within the Irish market and even into this country? I should like to know from the Minister if anything can be done to counterbalance that. If other countries are doing it something must be done by this country to keep a traditional trade such as furniture-making alive. This Bill was necessary and it will do a good job. I have not got the business experience of Deputy Donegan but this Bill can do things that the existing legislation cannot do and, for that reason, no matter what happens no harm can be done by having this Bill, provided it does the things we hope it will do.

There were a number of points raised by Deputy Donegan, some of which I dealt with on Second Stage and I do not propose to go into detail on these points again. I should like to point out that the function of Mergers Limited is different from the function proposed here for Fóir Teoranta. Mergers Limited are related to facilitating mergers in suitable cases and making provision for the necessary capital from the Industrial Credit Company. The functions of Fóir Teoranta are in the nature of rescue operations, as I indicated earlier and as Deputy Donegan appreciates. I indicated also that Fóir Teoranta would be lenders of last resort. This is because there is a provision in this section to the effect that "its continuance is in doubt because of inability to obtain its financial requirements from commercial sources".

Deputy Donegan spoke at some length about the growing practice of investment by banks in the equity of companies and in the placing of directors on the board of companies, thereby securing virtual control and forcing through mergers or rationalisation programmes that might appear justified economically but would not be justified taking every relevant factor into account. I would have sympathy with the point of view expressed by Deputy Donegan in this regard but I am not aware of any such cases occurring, although the Deputy might have such knowledge. However, perhaps he is simply expressing a fear of what might happen rather than of what has happened.

I have a fear only regarding reports I have read.

It is not our function on this occasion to discuss the role of the banks in that regard but I think the point Deputy Donegan was making was in regard to these fears about what the banks might do and he did not want Fóir Teoranta to do the same thing. Perhaps I did not get the Deputy's point right but that is what he appeared to say.

I would prefer that Fóir Teoranta had a debenture.

Like most of the problems associated with Fóir Teoranta and the definitions of powers, this presents a number of difficult problems on which there is a great deal to be said on both sides. One must make a judgment on where to draw the line. On the point raised by Deputy Donegan, there is the danger to which he has referred but it is quite conceivable that an operation of the kind he envisaged could be the only way of securing the viability of two companies and without that operation perhaps both would go to the wall resulting in unemployment. This is conceivable in certain circumstances. The opposite is also conceivable and one must try to adopt a flexible approach and deal with each case on its merits. This is what the board of Fóir Teoranta will have to do.

I do not think it would be correct for us to preclude Fóir Teoranta from taking shares in companies. I do not envisage they will do this to any great extent because their main activity will be in the field of concessionary loans. However, it is possible that in some cases which will reach them they will find that the amount of borrowing already engaged in by the company is so high that further loans and debentures would make the gearing impossibly high, and the company could not hope to remunerate the borrowing because of existing commitments. In such a case the only way to make a feasible effort at reconstruction may be the taking of shares in the company.

I visualise this happening in some cases—certainly not in all cases—but the most important thing to which we must have regard is to ensure that the legislation is sufficiently flexible to enable Fóir Teoranta to deal with the different cases that can arise. We must depend on the board of Fóir Teoranta to make the appropriate decisions in each case. They must approach each case on its merits. It is not possible for us to lay down hard and fast rules that would cover all cases. This was the difficulty I referred to earlier in regard to the drafting of section 4 in particular.

There was a reference by Deputy Cooney to the question of the commercial philosophy behind this as being somewhat vague. This may be partially true, and if it is it is for the reasons I have indicated, that one is trying to strike a balance between competing requirements, each of which has much to be said in its favour. I made it clear, and it is made clear in this section, that it is not contemplated that assistance would be made available through Fóir Teoranta to firms that had no hope of viability in the future.

I am prepared to qualify that to a minor extent, in that I can visualise that in certain circumstances of economic recession or excessive redundancies it could be justifiable to afford assistance to firms for a limited period. I say this with some degree of diffidence because I want to make it clear that this is not intended to be the refuge for all the dud cases in the country. There must be a number of dud cases at any given time; there will be more during a recession, but there will always be some such cases because of the nature of private enterprise. It is not intended to rescue every bad case from all its faults or to get it out of all its difficulties. We have tried in this section to spell out the circumstances in which assistance would be given. I think we have succeeded in indicating fairly clearly the criteria which should apply, but not indicating them so clearly as to tie down the board in all circumstances. I think we have done it as well as it can be done by indicating the principles but giving a sufficient degree of flexibility to Fóir Teoranta to enable them to deal with the kinds of cases that we can visualise coming up.

Deputy Tully raised some questions about the furniture industry. I am not in a position to answer some of them. He will appreciate that it is not directly concerned in this matter. All I can say is that I know from my past experience as Minister for Industry and Commerce that that particular industry made very considerable efforts to adapt itself for free trade. It started from a low base where it had quite a large number of small firms. It had in many cases no design, bad management and so on, and it made a great effort.

I would not agree with the Minister there.

This is true. For instance, if the Deputy looks at the CIO Reports on it he will find that it had been virtually written off, but he will also find that the industry itself, or at least sections of it, got together and made a tremendous effort which to a great extent paid off. The reasons for its difficulties may be as indicated by Deputy Tully; I am not sure offhand what they are and I cannot answer the question he asked about that.

Would the Minister try to find out from his colleague if something can be done there, because the quantity of imports of Polish and Czechoslovakian furniture is absolutely ridiculous? If you go into any of the big stores in the city you will find similar designs to those being made in Navan. We had full employment in the furniture industry in Navan 15 years ago and we have not got anything like it now; we have factories closing down. Therefore the management and the workers must not have been too bad at that time. There might be areas the Minister knows of but certainly not Navan. It was a boom furniture town until the last few years.

I shall not pursue that, because I know it is not in order. I know why Deputy Tully is raising it and he is quite justified because he is concerned about what is happening. He raised another question as to whether in cases where companies had closed down prior to the passing of this Bill, it would be possible for them to get assistance from Fóir Teoranta. It is certainly theoretically possible, but I would say that in practice it is extremely unlikely, because if they have already closed down the chances of reviving them are virtually nil. Usually the whole procedure has gone so far that it cannot be done, the work force is scattered and so on. However, in circumstances where it is possible to do so there is nothing in this Bill to exclude such cases from assistance from Fóir Teoranta.

That is fair enough. Would the Minister say if workers in the industry can——

Yes, I was coming to that. I can recall one or two cases of the kind Deputy Tully has in mind where the workers concerned were certainly prepared to make a considerable effort to get the firm going again. Again, there is nothing whatever in this Bill which would prevent such a thing, and the same criteria would apply as are laid down in the section, in other words, reasonable prospects of viability, if there would be serious repercussions nationally or locally, and these other criteria. If they are satisfied there is no reason on earth why such a proposition should not get assistance from Fóir Teoranta.

I should also like to say, in response to a question from Deputy Tully, that there is no basis whatever for thinking that the footwear industry has been blacklisted by the Department; he did not say it had been but he questioned whether or not it had been.

The IDA and the Industrial Credit Company have said the footwear industry was not one which was entitled to grants or loans because of the conditions. Maybe the Minister does not know this, but this is so. It is a pity, in view of all the people employed there.

If the position is as indicated by the Deputy, I think he can take it that this is not a blanket position but rather applies where an individual approach is made to the IDA in a particular case for adaptation grants or something like that and it is not possible to show that the proposed allocation would make that firm viable.

In fact the firm on whose behalf I was making representations were in the fashion footwear industry and were able to get accommodation, but it was pointed out that the fashion footwear industry—they did not say it was "blacklisted" but I assumed from the suggestion made that it was —was not one that was worthy of grants or loans because it could not make a go of it. This is the impression I got. Maybe I misunderstood.

I am in some difficulty. I can only surmise, because, as the Deputy appreciates, I am no longer dealing with the IDA. The point was raised again which had been raised on the Second Stage about the small company as against the larger company. I want to make it quite clear that the small companies are not excluded from this. In fact we visualise the bulk of applications to Fóir Teoranta will come from small and medium-size companies, and the wording of section 4 is designed to enable this to happen. Certainly there is no question of excluding small or mediumsize companies because of their size.

Would the Minister, then, refer to section 4 (2) (b) (ii) at the top of page 3?

Yes, that "the employment and capital employed in it are significant". That must be interpreted as meaning significant in relation to what?

That is what I should like the Minister to tell me.

If the Deputy would look at the very last sub-clause (vi) "its failure to receive financial assistance would have serious repercussions either nationally or locally", that gives an indication of the thinking that is involved here.

Leave the "nationally" out of it, but let us say that six people are employed in a firm in a village in my constituency. The effect of that firm closing down must be significant. Would the Minister think the same?

I cannot guarantee that the board of Fóir Teoranta will always take the same view as Deputy Tully, but the thinking behind the Bill and as set out in the debate in this House, which will be available to the board of Fóir Teoranta, is that the board have to interpret these criteria in relation to the particular case. There is nothing in the Bill to suggest and there is no intention of laying down here that a small firm is ineligible for assistance. Each case must be looked at on its merits. I think I indicated on the Second Stage that I certainly could visualise relatively small firms being of very considerable significance in their own area and therefore being eligible for assistance. I would expect the board to interpret that situation in relation to the location and the circumstances of the company. Deputy Tully might be interested to know that one footwear firm has received assistance from Taiscí Stáit which means they could come in under this Bill.

Is it a fashion footwear firm or a slipper firm?

It is a fashion footwear firm.

Deputy Donegan knows all about it. I think I have dealt with all the points raised but if Deputies are dissatisfied they can let me know.

On the question of footwear, it is true that the injection of capital mentioned was for a fashion footwear firm and we hope it will be a successful operation in the matter of keeping employment there. The firm had closed, not because of liquid capital trouble, but because of a decision of the main proprietor or, should I say, proprietress. She was not too young, there had been a fire and she made a decision which put a few hundred people out of jobs. A very large grant has been given for a new factory on the same site. Through the agency of somebody I know in America, I have learned that the company are one of the best in America. All their products will go to America. That case has a relationship with what the Minister said in regard to firms closing and starting again. This firm had closed down and was reopened because of the colossal grant given. I believe it was £1.3 million. It is an indication of how things can turn even when there is little hope.

I wish to make some general points on the section. First, I would be critical of the whole Bill because of its provision in relation to the rescue operation being mounted in time. The board cannot know if their services are required until they are called in by the company. In other words, the early warning call must come from the company and I can see difficulties in ensuring that this will occur. It is no answer to say "You did not call our attention to it in time", if the company involved deserve and could use help.

The word will have to get out strongly through the Confederation of Irish Industries, through the chambers of commerce, through the auditors professional association that this service is there and that the whole point is that it must be availed of in time. It should be stressed that there is no question of loss of face, that when people see warning signs they should come in. I would go so far as to think it might be made compulsory on the accountants of firms to warn Fóir Teoranta in time. If the industry is one employing a certain amount of labour and if failure could have national and local repercussions, I think the requirements of professional secrecy would have to take second place to the prospects of the disaster that might ensue because of failure to give early warning. It will be an urgent matter for the board to devise a system of early warning because if the assistance is to be beneficial the earlier the warning is received the better. This is a point which is essential to the success of the whole operation and I would put it even to the radical point of compelling information from auditors even against their clients' wishes. I would go that far.

The next point relates to how the new company will invest in the company needing assistance. The Minister said that purely a loan might be hopeless from the point of view that it could not be remunerated and that equity might have to be taken up in the company. I suggest we should see if the matter could not be taken a step further and that experts could be sent in, people who have expertise in, for instance, the science of management generally, if the problem in the company is one of management. If the company have technical problems in regard to production there should be provision for Fóir Teoranta to send in such assistance.

One often meets a situation in country towns where you have people with entrepreneurial instincts. A person manages to get an operation mounted, perhaps on a shoestring—his machinery literally might be tied together with shoe laces. His enthusiasm, and the enthusiasm of his workers, who probably would be neighbours, enable the industry to progress to a certain stage. Then the question of expansion comes in and the need to purchase proper machinery. At that stage, if the business becomes that more sophisticated, lack of management knowledge begins to prove fatal and the company find themselves in hot water. They go to Fóir Teoranta but at that stage more than money is involved.

My point is, whether Fóir Teoranta have the power to mount a proper rescue operation as distinct from the capital need. If not, this Bill will not achieve what is intended. Another point is in relation to who gets the assistance. The Minister has said that rescue can be arranged for all firms that are going down. Some of them do not deserve it. Again, who is to judge? In the past the fault I found with Taiscí Stáit was that there was an inconsistent pattern of assistance. In some cases, if the industry was large enough and dramatic enough, I felt, perhaps wrongly, that the assistance came in the face of all commercial advice. If the industry was not of such importance my personal experience was that the criteria applied were conservative and orthodox and completely unsuited for what was involved. It will be very important to decide here who judges the duds and what criteria will be applied.

I suggest to the Minister that the board should be made aware that an orthodox approach will be detrimental to the idea behind this Bill and that the simple commercial criteria of profitability will have to take second place to social criteria such as employment and other things which follow from it in a particular area. Will the ICC be involved or will the board itself set up their own advisory service? What body will make a judgement and decide "Yes, this firm has a hope and we will invest in it".

A further difficulty, or lack, in the objects of the company is that the memorandum, as indicated in section 4, deals only with companies which are actually in existence. I can envisage a situation where a homemade company grew up and had faults and needed help but called for the help too late, so the company "went to the wall" but where, if the call for help had come earlier and if other difficulties in the way of giving help to management were not present, that company could have been saved. A firm might be in a situation where it has to go into liquidation. There is nothing that I can see, unless I am reading section 4 wrongly, which would enable Fóir Teoranta to finance a revival of that company or of the company restructured in a different form with a different name.

I am speaking about a company I know of in Athlone where Taiscí Stáit decided not to invest, or to impose conditions which meant that the investment was not made. The company have gone into liquidation, but a proposition to set up a smaller type operation in the same premises with careful controls has now been formulated, but the amount of capital that will be raised would be extremely difficult to find in any small town. There is no power that I can see in section 4, under the objects as suggested there, which would enable Fóir Teoranta to come into finance this new, small, restructured company. It is essentially a rescue operation. That would be a serious gap in the activities of Fóir Teoranta and I ask the Minister if some arrangement could be made to cover that gap.

My last point refers to the time for the payment of interest by a firm borrowing from Fóir Teoranta. This is something which will have to be left to the board of Fóir Teoranta to decide on in any particular case. It could be a useful sanction in bringing a company back to commercial viability in a reasonable time to have strict repayment terms. Because of the rescue nature of the operation, this is something that will have to be applied with a considerable degree of clemency.

These are the points I wanted to make. I would be particularly interested in a system being devised to compel companies, when they see the warning signs, to alert Fóir Teoranta. Fóir Teoranta should have power to invest in a company which has failed but which has been brought into being again under a different name with a slightly different structure.

This whole question of an early warning system is one which we examined in some detail in the discussion on the Second Stage. At that time I indicated that I regarded this as a very important matter, as Deputy Cooney does. One of the reasons for the setting up of this company was the experience which we had, with Taiscí Stáit, of urgent requests coming in for assistance at such a late stage that they could not possibly be assessed on any workmanlike basis and hurried decisions had to be made without proper assessment and, therefore, with misgivings. Possibly some wrong decisions were made as a result. One of the objects of setting up this company is to ensure, so far as we can, that this kind of operation will be dealt with in future on a much more orderly basis. I would regard it as one of the first and major duties of the board of this company to explore fully the practical possibility of an early warning system. In another connection in another Department I had considered something on the lines of compulsory warnings by accountants as suggested by Deputy Cooney but, frankly, I do not think such a scheme would work or that we could enforce it. There is some doubt as to whether it would be justifiable. I am certain that such a plan would be strenuously resisted by accountants and, frankly. I think they would be right. If I were to suggest something similar in relation to solicitors Deputy Cooney would appreciate that they might be right to resist such a proposal. There would be a strong case for it but I do not think it would work.

As I indicated on the Second Stage discussion, the main line of approach has to lie in an educational and propaganda policy as stated by Deputy Cooney. This must relate not only to industry but also to accountants in particular. It will be one of the first and major jobs of the board of Fóir Teoranta to devise, so far as possible, a system which will give early warning of difficulties. Fóir Teoranta will have the power to bring in experts in regard to management, technical or other problems. They will have this power by virtue of the fact that they can impose such conditions before they agree to make assistance available.

Would the board have a panel of trouble shooters of their own?

I was coming to that. As I indicated before, the company will have to operate in the first instance, for a short time after it is set up, using the Industrial Credit Company as its management team. They will then have to consider whether they should have their own staff or should use existing staffs. This will be a matter for judgement by the board. At the moment this problem has come up with Taiscí Stáit on a number of occasions and they have insisted on not alone nominees on the boards of companies assisted in some cases but also on certain changes in management, accounting procedures and other things. They have done this by calling in people either from the ICC or IDA or Córas Tráchtála. There is a certain co-operation between the various State bodies in this regard and if a particular expertise is available in one and not in another it can be called upon and is called upon.

It seems to me that the board of Fóir Teoranta will have to consider whether the facilities available to them are sufficient for their purposes or whether they need to have these facilities within their own staff and under their direct control. I should not like to anticipate here: I can see various pros and cons. The board will have to decide this matter in the light of their own experience of operating the company.

As regards the type of cases that will be assisted, the decision must be made by the board and by nobody else. As to whether they can assist a company raised from the ashes, as suggested by Deputy Cooney, I understand they can and that the type of case visualised by Deputy Cooney would be an appropriate one in which Fóir Teoranta could give assistance. I am not sure, although I have an idea, of the basis of the Deputy's doubts but the advice I have received is that it would be possible for Fóir Teoranta to assist, under section 4, the kind of case the Deputy mentioned.

The only point I might make in relation to section 4 (2) (b) and the various paragraphs is that it seemed to envisage a company actually in existence. The restructured company could, of course, be got under way before the old company go into liquidation and to that extent I suppose they could come in, but if the old company had actually gone into liquidation I do not know whether Fóir Teoranta could then come in.

Deputy Cooney very wisely mentioned the question of the entrepreneur in small provincial towns who produced, possibly on a shoestring, a viable product which made money. With the possible exception of people in Dublin we all know such persons. I am sure the Minister does, since he was Minister for Industry and Commerce and had contact with such people who might not even have a company incorporated but probably would have a private company. I am sure Deputy Cooney knows, and I know, cases where such a company was never incorporated and where valuable employment was given. I am not certain that section 4—at a later stage I think the Minister must consider this—can in fact legally help such institutions. There is also the situation where very small private companies with the sort of capital this company is meant to have, £100, are supported entirely by family properties or funds and the company were and are regarded by many of the employees and the proprietors as of little consequence; that it is the people who count. The inflexible approach by people who regard a company as something more related to the idea of a public company, is just “not on”. I do not think this Bill can help Deputy Cooney's entrepreneur and I think the Deputy has demonstrated this in his references to section 4 (2) (b) and paragraphs (i), (ii), (iii), (iv), (v) and (vi). He was wise in generalising and saying that this was a section under which this could not happen. I think it cannot happen and that this is a pity. One of the major questions on the Bill and one on which we must decide before the Bill goes through the House, is whether the Bill can help small companies, small businesses. It is clear that the Bill excludes, and must exclude, small retailers who have got into trouble and for whom we are all very sorry.

They will be in more trouble shortly.

I agree, but that is another day's work. Under this Bill, the small company or the company who are only a nominal company with family capital or, more usually, family security behind them, cannot be helped. I could recall 50 different cases of which I know over my 16 years here where in fact employment is given by people and where the creation of a company merely had something to do with the giving of a debenture to a bank while in reality the property owned by the proprietors plus the employees' efforts kept the company going. To take a completely fictitious person it does not matter if Mr. Joseph P. Dowling of Ballyhaunis is running a business employing 50 people or 20 people. It does not matter because the probability is that Mr. Dowling has had to put into the bank the deeds of his farm outside the town, his house and his property somewhere else. As a result of this 20, 30 or 40 people are employed and the small company involved were probably incorporated by a local solicitor. This has no relation to the real fact that the proprietor has pledged his all and was making money and that at this stage he is in trouble because, with the advent of free trade, his product must have a different shape or form and must be saleable abroad because the home market will be taken from him. This Bill does nothing for him.

On the question of compulsory warnings by auditors and accountants I shall say something dreadful in the presence of one practising solicitor and the Minister and the other Members present: I think that is unconstitutional.

Would the Deputy repeat that please?

I am saying that in my considered opinion compulsory warning by a professional man to the effect that in his opinion a particular company is about to go to the wall, is unconstitutional.

The Deputy could be right.

I am prepared to bet £5 that I am right. In a private enterprise economy there must be the situation whereby a person who intends continuing will do so on his own opinion and if there are shareholders in a private company, or if there are directors elected by shareholders, either by proxy or by ordinary vote, what happens is that the majority rules. If one were to take the power of the worker as against the power of the proprietor, the matter would have to be considered in relation to the constitutional situation but it seems clear to me that there could not be a compulsory warning system. A man and his wife in, say, Ballyhaunis might be considering whether they should continue with their small company which was not doing very well or which had liquid capital problems. In their consideration, they would have to take into account their family and their workers and then decide what they should do. That course would be defended by our Constitution. It would not be possible to have a situation whereby they could consult their accountant, their solicitor or anybody else who would tell them that they must discontinue. That particular proprietor might have knowledge which he did not wish to disclose. Under the Companies Act, 1965, there are some matters which must be disclosed but there are others which need not be disclosed, for instance, personal funds. If a proprietor of a company decided for any reason that he should continue to employ people at a loss for the coming three years, that is his right and that is why I say that a compulsory warning system would be unconstitutional.

I want to make it clear that the section refers not to companies but to concerns, so that they need not be limited liability companies. In regard to the question of the eligibility of a firm that had closed previously, I am advised that such firms are covered but I appreciate the point made by Deputy Cooney. In fact, I have been adverting to it myself, that is, that the present tense is used in (b) of (2) of this section. I think it covers it but I will undertake to have a look at this, and if necessary, to have it amended perhaps in the other House, if amendment should be necessary. As of now, I am advised that it covers the kind of case Deputy Cooney has in mind.

If the firms concerned were big enough to get £1 million before this comes into operation, it would be all right but it is the little fellow who has gone and who has no hope of getting any help that I am worried about.

That is my worry, too.

I dealt at some length with this matter.

The courts do not interpret Dáil debates. They interpret what is in the Act.

The question of big or small is irrelevant on this point.

If I were to table an amendment to paragraph (ii) of (b) it would be to delete all the words after "capital employed".

It would be better to delete it altogether.

Yes, or, alternatively, to say "the employment and capital employed are such that great human suffering would be caused."

We are talking now about a different point to the one I mentioned, which was the query raised by Deputy Cooney about the eligibility of a firm that had closed and whether such firm would be eligible, technically, under this section. That does not relate to whether a company is large or small. Regarding Deputy Donegan's suggestion, the reason for the particular wording, "the employment and capital employed in it are significant", is to ensure that every little tuppenny-halfpenny business will not be brought in, but the last paragraph regarding "serious repercussions either nationally or locally" will allow in the kind of cases the Deputies have in mind. We do not wish to have Fóir Teoranta spending a great deal of time and money going through cases that have no relevance to this and if we do not leave in something on the lines of what is there, virtually everybody will be able to come in.

I can foresee Fóir Teoranta saying "Well, of course..."

I do not agree with this reference to tuppenny-halfpenny businesses.

They will only come to us when they are in trouble.

Regardless of whether they are in trouble a business that has employed 10 people for 10 months and which is likely to continue employing them for the next 10 years is very important.

What about a one-man business that is in trouble and comes to Fóir Teoranta for assistance?

I do not like the word "significant" in this context. Regarding paragraph (vi), if one were to look for serious repercussions in my local area, for instance, he would have to seek a definition of "serious repercussions". Four miles from me there are 1,200 people employed by GEC and four miles in the other direction there are 6,000 or 7,000 industrial workers employed in Drogheda. Therefore, serious repercussions in the context of that particular area would probably be defined by a lawyer as involving 200 or 300 people, but I would be concerned about even ten people who would lose their jobs anywhere within 20 miles of my area. Indeed, I would be interested in ten people who might lose their jobs in any area. I am not satisfied that the wording of this paragraph is correct. If ten people were to lose their jobs, the repercussions for them would be serious but in terms of the words "nationally or locally" there would be no repercussions. Local traders would hardly object because of the decrease in their business and neither would the other factors be involved. Rates would continue to be paid but ten people would take the emigrant ship.

In reply to the Second Stage I instanced the case of ten people employed which could certainly come within this. It depends on the circumstances. I would repeat that if you can visualise loosening-up so much that a one-man business which is in trouble and that a number of one-man businesses in trouble could come in under this, this is not what this Bill is about and it is not what this House should be doing. We have to draw the line and one must exercise one's judgement as to where to draw the line. A great deal of thought has gone into the wording of this section. I believe it draws the line where it should be drawn and at the same time leaves sufficient flexibility to the board of Fóir Teoranta to deal with the kind of cases that I think, from the discussion, Deputies on all sides want to see covered. I could not agree to opening it up so that there would be virtually no criteria at all in regard to significance or importance locally or nationally.

If I were sitting on the board of Fóir Teoranta and, if I had to make a decision as to whether or not 25 people in my area would create serious repercussions nationally or locally, and if I were very busy on that board and if I were not a politician whose interest is primarily in people, I believe my decision would be that it would not have serious repercussions either nationally or locally. Therefore I would say: "Let the little factory with 25 people close." I do not know whether Deputy Tully would like to put himself in the same position?

I am there all the time.

If section 4 is to stand part would the Minister look at these problems?

Yes, I have undertaken to look at the one mentioned by Deputy Cooney. I shall have another look at the one being talked about now by Deputy Donegan but I cannot undertake that there will be a change. If I can find some better way of doing it I will be glad to but, as I have indicated, a great deal of thought has gone into the wording in that regard. This is one of the very crucial points in the Bill.

I was a bit horrified by the Minister's reference to "every tuppence-ha'penny business in the country". He defined that later as a one-man business.

I did not say that. That is not what I said.

I do not want to put words in the Minister's mouth but I brought him from a 10-man business to a 25-man business and the reply was: "I will look at it again". One must look at the question of whether small businesses are to be looked after under this Bill.

Question put and agreed to.
SECTION 5.
Amendment No. 2 not moved.

I move Amendment No. 3:

In subsection (2), page 3, lines 23 and 24, to delete paragraph (d) and substitute:

"(d) that the auditor of the Company shall be the Comptroller and Auditor General".

We are all aware that the Comptroller and Auditor General is the constitutional official and he is completely independent in his operations. He is one of the important constitutional checks on the behaviour of the Executive and to a lesser extent the legislature. The whole point of the creation of that post is that State moneys would be audited by his office and by nobody else. Consequently, I am moving this amendment to provide that the very substantial finances which are to be handled by this proposed company will be scrutinised by the Comptroller and Auditor General and not by a firm of commercial accountants. There is no criticism implied of the standards of commercial accountants. The standards are of the highest. Nevertheless, it is State money that is involved and the State Auditor is the only person who should deal with it.

The practice has been growing in recent years for some semi-State bodies to have their accounts audited by commercial accountants. I have no doubt these have worked out satisfactorily but it is an unfortunate trend, in my opinion, and I would not like to see it carried on into the activities of this company. There might be some justification for the cases in which this happened in that the semi-State bodies concerned are trading enterprises and are in direct commercial competition with private firms from overseas or nationally. This particular company is set up to perform a State function and a function that can only be carried out by the State and is not in any way a commercial or trading enterprise. To that extent it is not comparable with the companies which have already got commercial accountants.

The amount of money which it will handle will be extremely large. Its borrowings can go to £7½ million under the Minister's proposed estimate and it will be taking over I do not know how many million pounds from Taiscí Stáit. The volume of taxpayers' money directly got from the Exchequer will be extremely large. This reinforces my argument that it is the taxpayers' watch-dog, the Comptroller and Auditor General, who should do the books of this company.

Another point which reinforces my amendment is the nature of the investment of Fóir Teoranta in companies up and down the country. There is no doubt that some of these investments will be the result of pressures. There is nothing wrong with political pressure, nothing wrong with pressure coming from a town to save an industry in that town, but some of these investments will be as a result of pressures and some of them will fail. That is unavoidable and something we must face up to at this stage. If investments are to be triggered by pressure and some of them are to fail, it is extremely important that the finance involved in those investments should be under the scrutiny of nobody but the Comptroller and Auditor General. I would urge this amendment strongly on the Minister.

I should like to support this amendment. It is probably the most important amendment that could be put down on this Bill. We are dealing with very large sums. Why did we decide that the Comptroller and Auditor General would not be the man to scrutinise this company? Why did we decide that it would be a firm of commercial accountants?

We did not.

Therefore, it is possible for the Minister to have these accounts scrutinised annually by the Comptroller and Auditor General?

Yes, the purpose of Deputy Cooney's amendment, as I understand it, is to say that only that can be done. Under the Bill, as it stands, you could have either.

What are the Minister's intentions?

The existing provision in the Bill is that no person shall be nominated as auditor of Fóir Teoranta without the approval of the Minister for Finance. That leaves it open to be either the Comptroller and Auditor General or a private auditor. Deputy Cooney's amendment is designed to ensure that it can only be the Comptroller and Auditor General. The general practice in legislation relating to commercial State-sponsored companies is to leave this question open as we are proposing to do here. In the case of non-commercial State-sponsored companies, that is where they are engaged in promotion or research or regulatory of some aspect of the economy, it is usual to name the Comptroller and Auditor General in the Bill as the auditor. Fóir Teoranta will be a commercial State-sponsored body, and at the outset and for some time to come all funds becoming available to it will come from the Exchequer. It is intended that the Comptroller and Auditor General will act as auditor of this company. In the Taiscí Stáit Act of 1963, and Taiscí Stáit is largely being replaced by Fóir Teoranta, the same provision was in, that is, that the appointment of auditor shall be subject to the approval of the Minister for Finance.

In fact, the Comptroller and Auditor General acts as auditor to Taiscí Stáit. As I have said, it is intended that the Comptroller and Auditor General will act as auditor in this case also for the reason that I mentioned, that certainly for quite some time to come, all of the money available to this company will be coming from the Exchequer. Nevertheless, there is something to be said for preserving some degree of flexibility in this. There could be circumstances —it is unlikely—where there would be, say, such pressure on the staff of the Comptroller and Auditor General that they could not cope with the audit.

There should be some flexibility in dealing with that kind of situation but the practice in relation to commercial State sponsored bodies, the practice in relation to Taiscí Stáit and the intention in relation to Fóir Teoranta, all add up to the Comptroller and Auditor general doing this. All I want to do is to preserve some degree of flexibility for some time in the future for a contingency that may arise. The intention is to have the Comptroller and Auditor General but, in order to preserve that degree of flexibility, I am not disposed to accept the amendment.

I do not accept what the Minister says in relation to all the money coming from the Exchequer. I have seen situations in which the idea of money being borrowed from abroad would have been frowned upon by this House as something almost sacreligious. Then in the last three to five years there have been constant borrowings from abroad. Now you have State companies highly involved in work in relation to our advent to the European Economic Community. You have a State company that is going to spend a lot of money. The Minister has his Capital Budget to look after. He can do it in two ways. He can borrow from abroad that which he cannot borrow at home and can lend to this company; or it might suit him, on the basis of the amount of money his Capital Budget requires, to borrow separately either abroad or at home, from, presumably, the commercial banks or any other agency, moneys for this company.

I do not imply at all that the Minister is guilty of an untruth when he says it is unlikely that there will be any borrowing except from the Exchequer, that there will be any sums provided except from the Exchequer, but the Minister will accept that in his office he may have the responsibility of making a decision tomorrow that may change a decision made a fortnight ago. He would be a very stupid man who would say that a decision made a fortnight ago is right for ever.

There might be borrowing. That is the first thing I want to say. The Minister has said it is unlikely that there will be borrowing except from the Exchequer. That is merely an opinion. There might be borrowing from outside sources and I should like to see the Comptroller and Auditor General as the signatory to the accounts at the end of the year. The Minister might reconsider his decision not to accept Deputy Cooney's amendment.

I am sorry, I did not quite get the Deputy's point. What is the significance of borrowing, or borrowing abroad, in relation to the certificate of the auditor?

There is the significance about it that when you provide money from the Exchequer you provide it in a certain way. It could be in one of 20 ways. You could provide it at certain interest rates. You could provide it at certain repayment rates. On the other hand, you might decide that a finance agency abroad or at home might provide £3 million or £5 million for this company. In those circumstances, I would prefer that the comments of the Comptroller and Auditor General would be available rather than the comments of a commercial auditor.

One of the things that I did not want to say but will say now because the Minister came back is that firms of commercial auditors and accountants have an undesirable situation facing them, that is, that funds will be given from this company to companies in this country and they could not act if they were at the same time the auditors of those companies. It does restrict choice. There is also the fact that firms of auditors, just like ordinary firms in private enterprise, are very often closely associated one with the other. I would prefer, and Deputy Cooney in putting down his amendment preferred, that the Comptroller and Auditor General would be the person who would sign the accounts and make the comments on the accounts. It might be valid to make comments on the question of whether or not the moneys provided should have been provided from the Exchequer or should have been borrowed from an external agency. I would prefer that the Comptroller and Auditor General would be the person to make that comment.

It is true that the Bill does provide for borrowing powers for Fóir Teoranta, but it does not provide powers for borrowing abroad and I would ask the House: who would lend money to Fóir Teoranta except the Exchequer? It is just not on. Nobody would lend us money.

Anybody would as long as the Exchequer underwrote it, thanks be to God, and I ask you then have you the intention to underwrite it?

It gets back to what I said: this company would get no money except from the Exchequer or with the guarantee of the Exchequer. In practice, nobody will give it money otherwise. I have indicated that it is intended that the Comptroller and Auditor General will be the auditor of this company. So, the only thing that is between us is the degree of flexibility which might arise at some time in the future, that by legislation we do not absolutely confine the auditorship of this company to the Comptroller and Auditor General. That is the only thing that is between us. It may never arise. If it should arise, the kinds of considerations mentioned by Deputy Donegan would have to be borne in mind at the time. Let us be clear that that is all we are disputing because, in fact, the Comptroller and Auditor General is going to be the auditor of this company at the beginning and, I would guess, for a very considerable time. As of now I cannot visualise a change but such change could occur at some time because of circumstances which would not relate at all to the kinds of things that Deputy Donegan had in mind.

I am suggesting that we ought not to tie down either the company or some future Minister for Finance so that they cannot deal with the kind of situation that could arise. But, it would seem to me that if there were a change, say, from the Comptroller and Auditor General to a private auditor, whenever that would occur there would almost certainly be a question in the House and an explanation would have to be furnished as to why the change was made. I do not think we ought to rule out the flexibility. We may be covering a possibility which will never arise but I do not think we ought to rule out the flexibility that is implied in the Bill as it stands.

There is a very serious issue involved here. The Minister has told us—I know that what he said is true because I have read the Bill—this company can borrow from anywhere. Now, if it is a rescue operation, we know that no one will lend it money unless that borrowing is underwritten by the Department of Finance and, if it is underwritten, borrowing will be freely available because it will be then a gilt edged investment.

But it is the Exchequer which would borrow.

It will be a gilt edged investment guaranteed by the Exchequer. Deputy Crowley might consider, perhaps, the terms on which such a loan would be granted. It could be granted on more advantageous terms than, say, a National Loan floated on the same day. It could be extended by agents here who would be the same source as outside agencies lending money. Money borrowed in Holland, in America——

No Minister for Finance will allow borrowing at a higher rate than that at which he can get money.

The best excuse the Minister has given so far for not accepting Deputy Cooney's amendment was a question asked in this House and an explanation. Question Time may fill the newspapers, but it is not the serious business of this House and never has been. It is at times invaluable, but it is not the serious business of the House. Deputy Cooney adverted to what is the serious business of the House, namely, enacting legislation as a result of discussion and debate here and it is conceivable that a Minister for Finance, who wanted to have a capital budget, could borrow from agencies within this State, agencies with commercial companies within the State; that would be the very same source as outside borrowing, which the Minister would do strictly for the Exchequer and, having done that, the position would be that a commercial auditor or firm of accountants, which had been appointed as accountants for the particular company, could find themselves in the position of being tempted. This would be a temptation for them. I have said they have been extremely good in this country all along the line and everybody knows they have. However, if two or three more State companies were coming up they might, perhaps, become the firm of accountants for these companies too but an adverse comment on the borrowing might, in fact, inhibit the Minister himself from giving them the job in another State company. I do not want to be difficult about this, but everyone knows in relation to certain companies aligned to the State—I use the word "aligned" deliberately— there have been appointments of firms of commercial auditors with political allegiance to and support for the Government.

In my view, Deputy Cooney has made a most valuable contribution in putting down this amendment. It should be the Comptroller and Auditor General. If money were borrowed at a higher rate of interest than it should have been borrowed at, or at disadvantageous terms of repayment, just as the auditor of a private company should put a note on the accounts adverting to that, then likewise a similar note should appear on these accounts. It is not fair to the firm of commercial auditors that they should have to balance against their desire to put such a note on the accounts with regard to bad borrowing the fact that they may not get a further appointment from a Minister for State. From that point of view Deputy Cooney's amendment is most valuable. The Comptroller and Auditor General is the person who should sign the accounts.

I found it difficult to follow Deputy Donegan's argument but I think I got the point in the end. I am not aware of any case in which it has been alleged that borrowing has been undertaken by a State company on terms unnecessarily high or on disadvantageous repayment terms. There may be such, but I am not aware of it. The argument seems to me to be a very theoretical one in justification of this amendment. What Deputy Donegan is saying, in effect, is that there should never be any auditor of a State company other than the Comptroller and Auditor General. That seems to be the logic of what he says because his argument could apply in any case in which there is borrowing power.

No. Obviously I have been offensive to the Minister or he is being offensive to me.

I am not.

I will not be offensive by giving the Minister examples of accountants being appointed——

I am not asking the Deputy to do that.

I am not going to do it.

I am saying the logic of the Deputy's argument is faulty.

Everyone knows there have been appointments of auditors to companies aligned to the State—I use "aligned" deliberately— and in one case it was even closer than alignment. In the case of a company calling for a rescue operation I do not think any firm of auditors should be asked to sign the accounts and make the proper comments upon them. Where such a company will receive some hundreds of thousands of pounds it should be the Comptroller and Auditor General who should sign the accounts and comment on them. That should be written into this Bill. What is important in this House is not the questions asked and the answers given to them but the legislation we enact here.

Deputy Donegan makes his point again and he does not listen to the point I made earlier. I will not pursue this any further. It is logical, but it does not interest the Deputy.

I think I am more logical than the Minister.

The Deputy is entitled to his opinion. I would say to the Deputy that he is underestimating the power of the Parliamentary Question. If he looks back over the records he will find that when I was a backbencher I put down a question about the auditors of a particular State company because the peculiar situation had developed in which both the Comptroller and Auditor General and a private firm were signing the accounts. The result of that question was to bring about a change in that situation. It also brought up what I mentioned here earlier, the general approach as to how auditors of State-sponsored companies should be appointed and the distinction between commercial and non-commercial accounts.

Who signed the particular accounts after the question was asked?

The Comptroller and Auditor General. I want to repeat that the intention here is that the Comptroller and Auditor General will be the auditor of this company. It may be that no question of any change will ever arise. I am suggesting though that circumstances could arise which might make this desirable and this flexibility should be allowed. The Bill should not be so rigid as to prevent such a thing happening. Anything else I would say would simply be repeating the arguments and I do not wish to waste the time of the House doing that.

The Parliamentary Question from the favourite son of the House, as yet uncrowned, is rather a different Parliamentary Question from that asked by Deputies on this side.

The only reason the Minister has given for not accepting the amendment is that he wants to preserve flexibility. The only reason he has given as to why he might want flexibility is that at a future date the staff of the Comptroller and Auditor General might be over-stretched. With respect this is begging the question and should that situation arise the staff should be expanded. If the principle of engaging and using this particular office is a good one it should be enshrined in the Bill. The Minister has indicated he is very firm on this and, if I can take what he has said as an assurance that so long as the borrowing is underwritten by the Exchequer the Office of the Comptroller and Auditor General will be employed, then, I shall be satisfied.

Yes, the Deputy may take it that so long as the substantial portion of the company's borrowing is from the Exchequer the Comptroller and Auditor General will be the auditor.

Amendment, by leave, withdrawn.
Section 5 agreed to.
SECTION 6.
Question proposed: "That section 6 stand part of the Bill."

With regard to section 6 it is rather drastic that the power of alteration in the memorandum be reserved to the Minister. This gets back to the amendment I proposed to sections 4 and 5 that these documents be laid before the House. The Minister, in his defence for refusing to accept that amendment, indicated that the kernel of these documents was contained in the Bill yet section 6 enables the Minister and the board to alter the memorandum. That is possibly a very drastic power which the Minister is keeping to himself.

The Deputy will appreciate that if we did not have this provision it is conceivable that Ministerial policy could be over-ruled by the board simply making whatever changes they wanted to make. Under this arrangement that cannot be done and the Minister is the one who is responsible to the House. As long as this provision is here any changes made mean that the Minister is responsible to the House for them. If we did not have this provision the Minister would not be responsible to the House and would not, at the same time, control what was happening in the company.

Section agreed to.
Sections 7 to 11, inclusive, agreed to.
SECTION 12.

Amendments Nos. 4 and 5 are cognate and may be taken together.

I move amendment No. 4:

In page 4, to delete lines 15 to 19, and substitute the following:

(b) the aggregate at any one time of the borrowings (including borrowings from the Minister and borrowing for any of the purposes of the Company which are consequent upon section 19 of this Act, but excluding borrowing by Taiscí Stáit Teoranta) which have not been repaid shall not exceed £7,500,000.

I referred to this amendment when introducing the Second Stage. It is designed to increase the borrowing that was proposed from £3 million to £7½ million. As I explained to the House before, this is partially to meet outstanding borrowings of Taiscí Stáit including commitments outstanding at approximately £1.3 million. The actual ceiling on the money which Fóir Teoranta may borrow for its own purposes is just over £6 million.

The point was raised by Deputy Tully on the Second Stage as to whether or not that figure should be higher. My own feeling is that, even though the higher rate of rescue operation at the moment could mean coming back to the House again in about two years time, nevertheless, since this is a new company we ought not to put the limit any higher. If, in fact, £6 million is utilised in two years time that means the company has been operating at a substantial rate and it would be desirable for the House to review its operations. I explained in more detail on the other Stage the reason for the increase. I am dealing now with the suggestion made on the Second Stage that the figure ought to be higher still. In my view it is wiser not to raise it so as to give the House an opportunity of reviewing the operation of the company within reasonable time. If this money is exhausted sooner than would normally be anticipated that is all the more reason for the House to have an opportunity of reviewing the operation of the company.

Is the Minister correct in saying that the net ceiling will be £6 million?

Approximately.

I read it to read that the aggregate would be £7½ million excluding section 19, that section 19 was on top of the £7½ million; in other words what comes over from Taiscí Stáit is additional.

The Taiscí Stáit commitments are approximately £1.3 million and the £7½ million includes the £1.3 million.

Section 12 (b) reads:

the aggregate at any one time of the borrowings (including borrowings from the Minister, but excluding borrowings for the purposes of any functions of the company which are consequent upon section 19 of this Act)...

Section 19 is the one which vests Taiscí and its liabilities in the Minister.

I think Deputy Cooney was looking at section 12 as drafted without perhaps looking at the amendment, am I right.

I think the amendment makes it clear.

It does, but there is another point which is not clear. The amendment makes it clear that anything which is brought over by section 19 must be within the limit of £7½ million. I am puzzled by the wording in the amendment, "but excluding borrowings by Taiscí Stáit Teoranta" because what else is in section 19 other than borrowings by Taiscí Stáit? Is this to include the interval between now and the winding up of Taiscí Stáit?

The position is that Taiscí Stáit Teoranta have certain limits on their borrowings and they are what are intended to be referred to when we talk here about excluding borrowing by Taiscí Stáit Teoranta. In fact, they have exceeded their limits by the £1.3 million which I mentioned. The intention is that that £1.3 million, plus whatever borrowings would take place by Fóir Teoranta, would have an upward limit of £7½ million.

That is not what it says.

What does it say?

It says "excluding borrowings" which is a different meaning altogether to what the Minister has said.

I think the reason for this is that, officially, the only borrowing which can be done by Taiscí Stáit is up to the limit; that the £1.3 million does not formally constitute borrowings by them because they have not power to do it. That would probably be the explanation for it.

The Comptroller and Auditor General will probably have something to say about that.

Would the Minister undertake to have his draftsman have a look at it before Report Stage so that if there is any error in it it can be corrected?

It has, in fact, been very carefully drafted but I agree that perhaps it could be clearer, whatever about being more accurate.

Would the Minister get the draftsman to have a look at it?

Yes, if it can be clarified I think it would be no harm. I think it should be because, while it may bear the interpretation which the Minister has given, I cannot see it now although maybe I am looking at it in the wrong way. I could not read it in the way the Minister says it is intended to be read, and for that reason I think Deputy Donegan is perfectly correct. The proper thing to do is to ensure there is something in it which can be read in a certain way and in no other way.

If the draftsman looks at it and, if it is desirable, the Minister might put down an amendment on Report Stage which might clarify the matter.

If it can be clarified I certainly will have it done. I do not think it is terribly clear at the moment.

We know what the Minister means anyway.

Amendment agreed to.
Section 12, as amended, agreed to.
SECTION 13.

I move amendment No. 5:

In page 4, to delete lines 24 to 27, and substitute the following:

"(3) The aggregate at any one time of advances under this section (including advances for the purposes of any of the functions of the company which are consequent upon section 19 of this Act, but excluding any advances made to Taiscí Stáit Teoranta) which have not been repaid shall not exceed £7,500,000."

Amendment agreed to.
Question proposed: "That section 13, as amended, stand part of the Bill."

I want to make the point which I made before which is that the Minister, of course, may make advances to the company. That is the more likely situation, but, at the same time, the Bill provides for borrowings by the company. This is something which will have to be looked at and is the reason for my previous remarks in relation to the Comptroller and Auditor General and whether or not it should be a private firm.

Question put and agreed to.
SECTION 14.
Question proposed: "That section 14 stand part of the Bill."

I would like to say the same point arises again and that I would certainly say to the Minister before he brings this Bill to the Seanad that Deputy Cooney's most valuable amendment should be considered. It should perhaps be reintroduced by the Minister if he feels he should do it and have the Comptroller and Auditor General only by law.

Question put and agreed to.
Sections 15 to 17, inclusive, agreed to.
SECTION 18.
Question proposed: "That section 18 stand part of the Bill."

All I wish to say is that this seems to be a global exclusion of all members of the Oireachtas from all boards. I have felt for years that this may be a mistake. It is true that a member of the Oireachtas is probably a member of a political party and, for that reason, if he is a member of a board, he is in a very invidious position because he may have to take a line, politically, or he may have to discuss within his political party certain matters pertaining to his membership of that board or company. At the same time the American idea would be entirely different, which is that it is well known when a person speaks exactly where he gets his information from. As far as our party are concerned we agree with this section but this is something which might be looked at in relation to this company and all the other companies for a while back which have had this particular exclusion of members of the Oireachtas.

There are many members of the Oireachtas who would grace many boards. There are members of the Labour Party, of the Fianna Fáil Party and of the Fine Gael Party who could provide very valuable assistance to boards. The idea here is that if you are a public figure you are excluded from being a member of one of those boards. The American idea is that you take your place on one of those boards, you do your work, and you come out and say precisely what you feel you should say and you are open to criticism on that basis. I go for the American idea but we in this country go for the other idea.

We are not opposing this section but we would like to say that it appears as if we are going overboard to try to prove that politicians, instead of being leaders of a community, are in fact people who should be avoided and should not be trusted in certain circumstances. We have it all over the place. We have the local schools which cannot be used for meetings of a political party but they can be used for anything at all under the sun. You have the new Industrial Development Authority which cannot have politicians. The present one is being held up because of the fact that Congress have put forward a Senator who is a trade union leader and cannot be appointed. This matter needs another look. If this House deprives politicians in the way in which the Government are doing it at the present time we can hardly complain if other people tend to join the chorus and say "us too".

I do not think this section is decrying politicians. I agree entirely with Deputy Donegan that there are members on different sides of this House who could be of considerable advantage and make considerable contributions on many boards of companies, be they State companies or otherwise. I do not think that is the point at issue. The point at issue is whether the public interest is seen to be served by such appointments. A good deal of thought has gone into this and the result has been that a provision, such as the one we have in section 18, has been included in all the more recent legislation dealing with the setting up of State-sponsored bodies. There is a good deal to be said for the American viewpoint to which Deputy Donegan referred, but it implies a willingness on the part of the politicians concerned to declare their interest. It may be that one of the difficulties about our present system is that politicians frequently make speeches without declaring their interest——

It has been known to happen here.

If we were more in clined as politicians to declare an interest when we have it the position might be more satisfactory. All I want to say on this section is that it is following exactly the same line we have adopted in the more recent legislation dealing with State-sponsored bodies. A good deal of thought and argument have gone into it; this is the conclusion we have come to, and this is what we are applying to each State-sponsored company as the legislation comes up.

I regard the declaration of interest as an important matter. I have been in this House for 16 years and whenever I had an interest in any matter I declared it. Membership of boards of this kind by Members of the Oireachtas would have to be very selective. For instance, heads of political parties would need to be very careful of the people they allowed to be members of such boards. There might be occasions where people might be asked by a Minister to go on the board of a company and they might be there as mischief-makers. At the same time, it is true that the presence of Members of the Oireachtas could be of great value and in the rescue of any company the unanimous support of all sides of this House could be of help. It could mean the end of further criticisms here of decisions made if the matter was unanimously decided in this House.

Question put and agreed to.
SECTION 19.
Question proposed: "That section 19 stand part of the Bill."

The important part of the Taiscí Stáit Teoranta Act was that any sum expended in excess of £250,000 was a Cabinet decision. A classic example of a Cabinet decision in this regard was the sum of £940,000 paid to Potez Limited. This Bill we are discussing is changing this and it is appointing under section 5 a board of up to seven people all appointed by the Minister. Section 4 (2) (b) (vi) provides that "its failure to receive financial assistance would have serious repercussions either nationally or locally" and this is the reason for the extension of a loan, the taking of shares or the injection of capital.

Taiscí Stáit Teoranta have done some very worthwhile things; they have also done some bad things. In the debate on the Estimate for Industry and Commerce recently I mentioned some good work carried out by Taiscí Stáit. The case I mentioned was where GEC of Britain had deliberately closed a factory in Dundalk—happily it is open again under another production. Taiscí Stáit provided assistance in this case and through the aegis of Mr. Martin McCourt, managing director of GEC, and Taiscí Stáit we have got control of retail outlets in respect of production involving 1,200 workers. Now we are not dependant on any cut-back plans by GEC. The decision taken in this case was the correct one. However, the decision taken by the Government with regard to Potez was disastrous.

This Bill could be more all-enveloping; it could be a Bill that would not mean it will act as a kind of hinterland between the IDA, the ICC, Coras Tráchtála or any other Government agency. It could be a Bill that could have a more direct relationship to the rescue operations envisaged in it. It could be a Bill like the IRC Bill in Britain; this Bill was removed by the Tory Government to their subsequent regret and it may be re-instituted by them.

We must impress on the Minister during the Report and Final Stages the necessity for a critical examination of this Bill and the necessity to produce an instrument that will defend the jobs of our people as free trade approaches. Taiscí Stáit could not have done that; there was need for a more all-enveloping Bill than the one now before the House. However, the need for such a Bill has been partially filled by the Fóir Teoranta Bill, 1970. It is necessary that this House would consider this Bill in detail because our inevitable movement towards free trade makes it a necessity. There is no doubt that we shall enter the Common Market. Britain has made her decision and, having regard to the fact that 70 per cent of our trade is with that country, we have no option but to enter the EEC. This Bill has deficiencies; it will be our duty to see that they are rectified and that we will have an instrument that will preserve the maximum number of jobs in existing industries.

I have said before that there is more rejoicing at the sight of a Minister or a Parliamentary Secretary opening a petrol filling station that might employ three or four people at minimum wages than there is in the protection of existing jobs. This Bill deals with the protection of jobs and I welcome it. Let us decide in this House to accept what is put before us and to do our best to ensure that we have an instrument that will defend existing jobs in the inevitable situation of free trade.

Question put and agreed to.
Section 20 to 23, inclusive, agreed to.
Title agreed to.
Bill reported with amendments.

I think it would be unwise to take a Bill of this serious nature now. I do not want to hold up the Government or the House.

There have been a few points raised which I agreed to look at and I did indicate that I would look at them prior to going to the Seanad. If anything has to be done in relation to them I shall do it there, and then, of course, the Bill will come back to this House.

It would be coming back here anyway.

In that case I am prepared to take it now.

Bill received for Final Consideration and passed.

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