I move:
That a sum not exceeding £16,806,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of March, 1972, for the salaries and expenses of the Office of the Minister for Transport and Power, including certain services administered by that Office and for payment of sundry grants-in-aid.
It is my intention to take a Supplementary Estimate of £5,459,000 for the purpose of defraying further charges on the Transport and Power Vote for the current year, arising out of additional grants to Córas Iompair Éireann and Bord Fáilte Éireann and to provide for additional expenditure under Subhead P., Commissions, Committees and Special Inquiries, arising out of industries like CIE and the ESB. Savings of £300,000 are also being taken into account.
Deputies will recall that the Vote for Transport and Power was passed without a debate on 11th December, 1970, and that Supplementary Estimates amounting to £3,622,470 were also passed during the last financial year. A motion was put on the Order Paper subsequently to enable a debate to take place on the activities of the Department of Transport and Power for that year. It is proposed to take the motion and the current year's Estimate together.
I appreciate that Deputies may have some difficulty in following comparisons with the 1970-71 provision and for this reason a tabular statement has been circulated which it is hoped will clarify the position. This includes the Supplementary Estimates I have just mentioned. The principal increases in 1971-72 as compared with the previous year are in the provisions for Salaries, Wages and Allowances £215,000 (Subhead A); Equipment, Stores and Maintenance £38,300 (Subhead C); Additional Grant to Córas Iompair Éireann £1,484,000 (Subhead D.3) after taking into account the Supplementary Estimate in the previous year and the present Supplementary Estimate; Grants-in-aid under the Tourist Traffic Act, 1961, £529,990 (Subhead F.1); Resort Development £100,000 (Subhead F.2); Development of Holiday Accommodation £1,300,000 (Subhead F.3); Acquisition of Land and Buildings at Airports £90,000 (Subhead G.1); Radio Equipment £100,000 (Subhead I); Rural Electrification £175,000 (Subhead N). Small increases in other subheads amount to £92,050, bringing the gross increase to £4,124,340.
The principal decreases in 1971-72 are in the provisions for Travelling and Incidental Expenses £130,820 (Subhead B.1); Investment Grants for Ships £1,065,000 (Subhead S), and the nonrecurring grant to CIE which amounted to £642,460 in 1970-71. Small decreases in other subheads amount to £26,947 bringing the gross decreases to £1,865,227.
The appropriations-in-aid show an increase of £357,583 as compared with 1970-71. The principal increases are Passenger Load Fee (replacing Passenger Service Charge) at Airports £110,000 (Subhead V.3); Recoupment from Eurocontrol £110,000 (Subhead V.4); Surplus on Shannon and Cork Airports £259,000 (Subhead V.8). Decreases are on the Surplus on Dublin Airport £145,000 (Subhead V.7) and Sales and Catering Service £11,000 (Subhead V.9). The increase of £357,583 on Appropriations-in-Aid is equivalent to a decrease in the net grant and brings total decreases to £2,222,810.
On the basis of the total increases and decreases mentioned above, namely £4,124,340 increase and £2,222,810 decrease, the net increase compared with the 1970-71 provision is £1,901,530.
The activities of the Department fall into two main categories, those which are carried out by State-sponsored organisations and those which are administered directly by the Department. Deputies have received copies of the most recent reports of the various State-sponsored organisations. The information in the reports is supplemented by the notes which I have circulated for the information of Deputies in connection with this debate.
First, I propose to deal with the State-sponsored organisations.
The country's demand for electricity continued to increase at a high rate, being 10.4 per cent higher in 1970-71 than in the preceding year. This continuing rate of increase—the average for the last three years was also over 10 per cent—is one of the highest in Europe. It is an indication of the rapid growth in industrial development and of higher living standards generally.
The growth in demand calls for very substantial annual investment by the ESB in generating, transmission and distribution equipment. I have approved the board's forward generating plant programme for the years 1975-76 to 1977-78. This will consist of two 250 megawatt oil fired units at Tarbert, County Kerry, and another at Pigeon House "B", Dublin.
By 1977-78, the board's generating capacity will be 2,800 megawatts— almost double the existing capacity. The estimated capital cost of this expansion is £36 million. Further expenditure on additional generating plant totalling about £85 million is expected to come up for approval during the next three to four years. With the development in the technology of nuclear generating plant and the growth in the unit size of ESB plant, the installation of a nuclear plant has been under consideration. A nuclear station would provide some diversification of sources of fuel supply. While no firm decision has yet been made to build a nuclear station, the ESB have for some time past been training engineers in nuclear work and have got together a special project team to examine in detail all the technical, economic, social and financial problems connected with the operation of a nuclear plant. The board will need to consider all aspects of such a project, which could cost up to £80 million, before coming to a decision to recommend an installation to the Government. In this connection I might mention that a new dimension has been given to this problem by the recent discovery off Kinsale of what appears to be a promising natural gas find. While further testing and exploratory drilling will be required before it is established that there is a gas field capable of commercial operation in this area, the ESB will be closely watching developments over the next couple of years.
The capital cost of a generating plant based on natural gas would be about 60 per cent of equivalent nuclear capacity. Existing and planned oil-fired stations could be converted to natural gas at a relatively low cost. A gas discovery within the area would, of course, have enormous advantages from the point of view of security of energy supplies.
With increased costs, and bearing in mind the board's statutory obligation to keep their accounts in balance, periodic increases in charges have been unavoidable. The cost of their main fuel, oil, did not, in 1970-71, reflect the substantial increases in price which have been imposed by the producing countries, but in the current and following years fuel oil is going to cost a great deal more. There were increases in the cost of turf fuels, but increases in the ESB's substantial payroll—they employ nearly 12,000 workers whose remuneration must be kept in line with national trends—and substantial increases in the cost of capital were more significant. For some years the board have had to invest about £20 million per annum in generating, transmission and distribution equipment and, within the next decade, they could have to invest a total of over £300 million. The cost of borrowing has risen very much and the periods for which loans are available have shortened considerably. The result is that the necessary annual appropriations for the servicing of capital have had to be increased accordingly. Capital is scarce as well as being expensive and the board have had to go abroad for a significant part of their requirements. Indeed, the scarcity of new capital may force the ESB to rely for funds for new investment to a much larger extent on their own resources, that is on additional appropriations from an increased revenue.
The board must at least maintain their charges at such a level that revenue covers expenditure and normal appropriations. Servicing of capital is a proper cost of production of electricity and it will be impossible for the board, both because of their statutory obligation to pay their way and because they must be able to demonstrate their creditworthiness to prospective lenders, both home and foreign, to hold electricity prices below the cost of production. To permit the board to balance their books by way of subsidy instead of by increasing charges would not help. It would merely mean a transfer of responsibility from consumers to taxpayers— two groups which are largely identical. There is no reasonable alternative to enabling the ESB to meet their expenditure. An examination into the costs of the ESB is proceeding. The net position is that once it is established that costs are reasonable, then there can be no question of the ESB not being allowed to recover these costs and provide the depreciation and other reserves necessary to enable them to function viably. We must, of course, be satisfied that the management is effective and that policy is on sound lines. The management structure was recently subjected to close examination by a firm of consultants, McKinsey and Co. and their recommendations have been implemented.
On the matter of policy and costs the Government has been satisfied that the ESB have been operating efficiently. Nevertheless, it felt it reasonable that these aspects should again be looked at objectively by experts and accordingly I have appointed a group to carry out the necessary investigation and to report to me. This group is comprised of persons of high international standing in the diverse fields of activity which arise in the electric power production and distribution industry.
I have been giving consideration also to the possibilities of more rational use of various forms of energy with a view to seeing whether more economic use of fuels can be achieved and more reduction achieved in the capital investment necessary to convert fuels into energy for consumption. It is with this in mind that I have invited the ESB and the Dublin Gas Company to meet me for exploratory talks.
Before departing from the question of charges, I think I should stress that, although rates of charge may appear to be rising quite quickly, the increasing efficiency of the ESB, the more widespread utilisation of the lower follow-on rates of charge and the greater use of cheaper electricity in the off-peak and night periods have resulted in the average price per unit received by the board being only 13 per cent greater in 1970-71 than it was as long ago as 1935. This is quite an achievement in view of the erosion in the value of money in that time. Of course, the structure of electricity tariffs varies considerably, and some consumers may feel that their two-monthly bills are high for the amount of current they use. Actual consumption is not the sole measure of the cost to any electricity producer of having supply available to a consumer the moment he demands it however. In some countries there is a multitude of suppliers, each with his own tariff, instead of a single national supplier as in this country.
In general, the board's tariffs compare very favourably with most West European tariffs, especially for domestic supplies. British, Dutch and French tariffs for big industries are about the same as the board's rates. It is true that large industrial users in Norway, Sweden and Switzerland have cheaper power but in those countries cheap hydro-power is the main source of supply. In addition, more industrialised and more densely populated countries have much more favourable conditions for minimising distribution costs and getting the cost advantages of very large generating plants, including nuclear plants, which require a very high load factor.
I dealt very fully with rural electrification when introducing the Electricity (Supply) (Amendment) Bill, 1971, before the summer recess. In accordance with the Government's intention, as explained at that time, the ESB are now engaged in a crash programme to complete the massive task of rural electrification which began in 1946, by offering supply at subsidised rates to all unconnected householders in rural areas by 31st March, 1975. This programme will cost about £18 million towards which the State will pay subsidy amounting to £10 million. This expenditure will bring the total cost of rural electrification to £67 million including direct State subsidy amounting to £27 million.
The continuing and rapid growth in the ESB's activities naturally raised the question of the need for changes in top management organisation and procedures. Following an extensive review, to which I have already referred, a revised structure of top management and procedures has been put into effect. The new structure, which draws a clear distinction between policy making and managerial functions, means that in future the board will be concerned with major planning and policy issues and their direct involvement in executive decisions will be limited. A new post of chief executive has been established, with overall responsibility for management, and accountable to the board for the implementation of approved plans and policies. The new structure resulted in the appointment of directors in charge of each of the four main areas of activity — generation transmission, finance, commercial, personnel; the directors and the secretary will report through the chief executive. Other organisational changes are also planned by the board.
Harvesting conditions for peat in 1970, although not as good as 1969, were only slightly below average, and Bord na Móna reached a satisfactory production level. On the sales side the board had a satisfactory year; substantially increased quantities of both machine turf and briquettes were disposed of in the domestic market but the quantities of both sod and milled peat delivered to the ESB were slightly down on the previous year.
As regards the financial position, Deputies may recall that, by 31st March, 1968, Bord na Móna's debit balance had amounted to £4.8 million, due largely to the bad weather during the 1960s. The Turf Development Act, 1968, was enacted to give the board some temporary financial relief in the form of a waiver of interest and the deferment of capital repayments due by the board to the Exchequer in the four-year period ending in March, 1971.
By 31st March, 1970, the financial position of the board was improved considerably. Waivers of interest, totalling £4.226 million, and commercial profits of £549,000 reduced the board's deficit to £37,000. This improved financial position enabled the board to make good during 1969-70 deferred capital repayments, so that their capital repayments are up to date.
The year 1970-71 was a satisfactory year for turf production and Bord na Móna finished the year with a credit balance of £1,408,000. However, interest amounting to £562,000 due to the Exchequer was waived, otherwise the credit balance would have been reduced to £846,000. This is the final remission under the 1968 Act and it leaves the board with a small reserve of funds to meet contingencies. Harvesting conditions in 1971 were quite satisfactory and the board expect that they will be able to meet their liabilities.
At the same time as the Turf Development Act, 1968, was passed, my predecessor arranged for the appointment of a firm of consultants to examine the affairs of Bord na Móna, both from engineering and financial standpoints, and to assess future prospects. The consultants have recommended a restructuring of the capital of the board and this is receiving active consideration at the present time. Indeed, I hope to be introducing legislation early next year to deal with this and other matters affecting the affairs of the board. This will give Deputies an opportunity of discussing the affairs of the board in depth.
Next, I wish to refer to developments in civil aviation.
The air companies—Aer Lingus and Aerlínte—have succeeded in making a net profit in each of the past ten years. In the year ended 31st March, 1971, the net profit amounted to £838,000 compared with £664,000 in the previous year. Passengers totalled 1,631,000 as against 1,465,000 and cargo 49,141 tons compared with 45,113 tons in the previous year.
Aer Lingus passenger traffic, which accounts for about 80 per cent of the total numbers carried by the two companies, shows an increase of 12 per cent over the previous year. The increase has been mainly achieved on the continental routes and on charters. Cross-channel traffic, which has previously been slow to grow, increased by 9 per cent in the last financial year. The closure of the Menai Bridge was a contributory factor in this increase as also was the introduction of jet services on all cross-channel routes. The company now operate an all jet fleet of 4 BAC III's and 8 Boeing 737's.
Revenue-passengers carried by Aerlínte passed the quarter million mark in 1969-70 and in the last financial year totalled 275,817. The introduction of new promotional type fares and an extensive promotion of the winter holiday attractions of Ireland have increased traffic for the company. Over the past two years the company have introduced new routes and increased the frequency of existing routes to meet changes in demand.
The company took delivery of two Boeing 747's (Jumbos) in March, 1971, and they went into service in April and May. The Aerlínte fleet now consists of 6 Boeing 707-320's and 2 Boeing 747's.
The companies' capital programme calls for expenditure of £71 million in the five year period up to 1972-73. £29 million is being provided from the companies' internal sources, £27 million by external borrowing and £15 million by the Exchequer in accordance with the provisions of the Air Companies (Amendment) Act, 1969.
While the Irish air companies passed through last year without serious setbacks, it is clear that the auguries for the current year are far from good and that, in common with other international airlines, the companies are up against very formidable difficulties— the economic recession in America, the present unrest in the North and domestic inflation. In addition, charter competition is diverting traffic from the scheduled airlines. In an effort to meet this competition the airlines are relying on special promotional fares at low level. This has resulted in dilution of revenue. We have consequently the anomalous position of traffic growth accompanied by a drop in revenue. In fact, some of the large airlines incurred substantial losses in the year 1970. Aerlínte who traditionally carried a high proportion of lower fare passengers are particularly affected by this trend towards lower fare levels. Up to a few days ago the possibility existed of an open fares situation on the North Atlantic for next year. However, I understand that the airlines concerned have agreed in principle to a new fares package which includes lower promotional type fares. The situation for Aerlínte is aggravated by the increase in aircraft capacity as a result of the introduction of the jumbo jets. On the North Atlantic the consequence is that there are at present too many seats for not enough passengers. We had a somewhat similar situation in the early 1960s following the introduction of jet aircraft but after a few years these aircraft more than justified themselves economically. I am hopeful, therefore, for the future of the air companies, though growth will be slow as it will depend a great deal on improved economic conditions in the world and, for the Irish airlines, on an early return to peace in the North. I must, nevertheless, point out that Aerlínte are likely to suffer a loss this year and also next year.
I should like to bring the House up to date on the position in relation to the arrangements for airport management. As the House is aware, I asked Aer Rianta in April, 1969, as a preliminary to the setting-up of an airports authority, to assume responsibility for the management of Shannon and Cork Airports on the same basis as the company managed Dublin Airport, as my agent. This arrangement is continuing to work satisfactorily and my Department have almost completed work on the preparation of the necessary legislation to make Aer Rianta a fully-fledged airports authority. I hope to introduce the necessary legislation after the Christmas recess.
Aer Rianta had an operating surplus of £1.5 million for the year ended 31st March, 1971, compared with a surplus of £1.7 million in the previous year. Shannon Airport contributed £9750,000 while Dublin contributed £572,000. Cork Airport had an operating loss of £46,000. The drop in the operating surplus was due mainly to increased costs.
Aer Rianta acts as the Minister's agent in relation to certain expenditure and collects certain income on his behalf. Aer Rianta expenditure is only a portion of total expenditure on the airports. A comprehensive statement of revenue and expenditure in relation to the three airports is prepared by my Department and published annually in the Appropriation Accounts. This statement which compares all revenues and all expenditure, including expenditure on the State services, such as air traffic control, meteorology and radio and also the cost of remunerating the capital invested in the airports, shows that the airports in the overall context still incur a deficit.
Passenger traffic at Shannon Airport dropped by 6 per cent in 1970 compared with 1969 due to a drop in transit traffic. Traffic at the airport for the first nine months of 1971 has shown an improvement with an increase of 5 per cent in terminal traffic over the corresponding period of 1970 and an increase of 59 per cent in transit traffic giving an overall increase of 19.5 per cent.
Following a decline in 1967, air traffic at Dublin Airport recovered in 1968 and improved again in 1969 when passenger traffic increased by 8 per cent and freight by 11 per cent. There was a further increase of 12 per cent in passenger traffic in 1970.
After a drop in 1968, traffic at Cork Airport recovered in 1969 with an increase of 6 per cent in passengers and 33 per cent in freight. This upward trend continued in 1970.
As the House is aware, large scale development works are in progress at Shannon and Dublin to cope with the needs of growing passenger traffic and large capacity aircraft. These works include the provision of new passenger terminals and additional apron space.
Work on the new terminal building at Shannon which was operational last May when the Boeing 747 aircraft commenced scheduled services into the airport, is complete. Work on the installation of airbridges is in progress and is expected to be completed early in 1972.
The Dublin passenger terminal project consists of a new terminal building and pavilion, and a two level road system. The pavilion building was completed for use last April and it is expected that the whole project will be completed in April, 1972.
The present runway system at Dublin Airport is nearing the end of its useful life and for this reason and because of traffic growth a new runway system will be required fairly soon. A new east-west runway may be necessary within five years and an additional parallel runway at a later stage, perhaps, not for 15-20 years. The acquisition of the necessary land is proceeding.
The fire station at Cork Airport has been extended to provide accommodation for additional fire tenders shortly due for delivery. Visual landing aids on the main runway are being augmented. In addition, an extension of water supply facilities is nearing completion at the airport. More detailed particulars of the works in progress at all three airports are set out in the notes already circulated to Deputies.
I should at this juncture refer to the US pressures for landing rights at Dublin for transatlantic air services. As the House is aware, the US authorities, following the Government's refusal last August to grant such rights, gave notice under the provision of the bilateral air agreement between the two countries, that with effect from 18th August, 1972, landing rights for Aerlínte at New York would be withdrawn.
The Government's attitude in the matter all along has been that the interests of Shannon Airport, the western tourist areas and of the national airline are best served by maintenance of the air agreement in its present form. In view of the US action, and its consequences for Aerlínte, discussions with them were necessary. Consultations were held in Washington on November 23rd and 24th between delegations representing the United States and Ireland in connection with the air transport agreement between the two countries. There was a full exchange of views but no agreement was reached on the matters discussed. The delegations agreed to adjourn and to report to their authorities. At this stage I do not propose to say anything further on this aspect of the matter.
I wish, however, to deplore the mischievous and irresponsible attempts made by Deputy O'Donnell of the Fine Gael Party to sabotage the national interest immediately before the commencement of the discussions. I met the various groups interested in the landing rights issue, and it was agreed by all concerned, including Deputy O'Donnell, that this was far too important a national matter to be clouded by a party political attitude. I regret that Deputy O'Donnell broke the line in this respect. I am glad that he was the only one.
In Limerick last Sunday night and earlier at a Fine Gael function in Galway Deputy O'Donnell spoke about a sell-out on the part of the Government in regard to Shannon. This was designed to undermine the Government's stand on the eve of these vital discussions. Deputy O'Donnell, however, has only succeeded in injuring his own reputation as a credible political figure.
The Fianna Fáil Government are negotiating on behalf of Ireland and have got their priorities right. Shannon was started by Fianna Fáil and will always be cherished by Fianna Fáil.
As from the 1st April last I abolished the unpopular service charge levied on departing passengers at our airports. This charge is now payable by the airlines and is incorporated in the cost of the ticket. To meet the additional cost to the airlines, I approved the introduction on 1st April, 1971, of an increase of 3 per cent on the London route and 4 per cent on other cross-Channel routes.
As from 1st November, 1971, a surcharge is shown separately on all air tickets and airway bills other than those on the North Atlantic to cover the cost of air navigation services allocable to en route flights. In the past no separate charge was made on the airlines for those services. The member states of Eurocontrol and other European states now propose to introduce a charging scheme aimed at the recovery of 15 per cent of the cost of these services for a start and working up to full recovery over a period of years. The purpose of the surcharge is to enable the airlines to recoup the cost of the new charge.
The Institute for Industrial Research and Standards continues to monitor the test flights of the Concorde supersonic aircraft along the Irish sea corridor. Prior notice of such flights is received from the British authorities. So far no sonic boom effect has been detected by the institute. Some recent sonic boom effects on the south west coast are the subject of an inquiry to the British Ministry. Both the British and French authorities have given undertakings to us that the test flights would be routed so as not to cause supersonic booms over Irish territory.
The incidence of hijacking and other attacks against civil aircraft have, fortunately, abated in the past year. This type of activity, apart from the danger and inconvenience to the innocent parties involved, strikes at the very heart of the air transport industry and we must continue to seek after remedial and preventive measures to stamp it out. In line with administrations of other European countries we have adopted security measures for our aircraft.
Conventions have been concluded at Tokyo and the Hague for the suppression of unlawful interference with aircraft and I had intended to introduce a Bill in the House during this session to give effect to these conventions. However, a further convention was concluded in Montreal in September of this year dealing with sabotage to aircraft and consideration is now being given to incorporating the three conventions in a composite Bill. In any event, I hope to introduce the necessary legislation in the next session.
Air charter regulations have been tightened up and enforcement stepped up both by ourselves and the Governments of other countries. Additionally, the International Air Transport Association (IATA) impose heavy fines on member airlines where the charters are found to be illegal. The result is that quite a number of illegal charters no longer operate. The reasons for strict regulation of charter operations are readily understandable. Scheduled services are essential and because they have to operate regularly in peak and valley periods, they have much higher unit costs than nonscheduled operators. The scheduled fare is based on these costs and if a lower charter fare is made available, it is only reasonable to expect persons travelling at that fare should comply with the conditions laid down. In the main these conditions are (i) the group should have a separate identity and objects other than travel (ii) passengers should be members for more than six months and (iii) there should be no public advertising for passengers.
Deputies will recollect that last December legislation was enacted— the Transport Act, 1970—providing for payment to CIE in the financial year ended 31st March, 1971, of non-repayable grants not exceeding in the aggregate £2.98 million. The legislation was necessary in order to bridge the gap between CIE's then estimated net deficit of £5.63 million in 1970-71 and the board's statutory annual grant of £2.65 million. In the event, CIE's net deficit in that year amounted to £6.171 million which represented an increase of £2.937 million on the board's net deficit in the preceding year. The increased deficit was due largely to the effects of inflation, reflected particularly in increased labour costs.
As in previous years, CIE's losses in 1970-71 were attributable almost entirely to the railway, but for the first time a loss, amounting to £285,000, was incurred on the Dublin city bus services. The board's provincial services continued to be profitable but not as much as in previous years. This also applied to the hotels and catering services. Tours and private hire showed a net loss of £28,000. A net loss of £139,000 was incurred on the board's road freight services.
The total subsidy paid to CIE in respect of the two years 1969-70 and 1970-71 was inadequate to the extent of £1.268 million to meet the board's losses in those years and the inadequacy was met to the extent of £1.114 million by the deferment, with the agreement of the Minister for Finance, of interest payments on capital advances due by CIE to the Exchequer in respect of those years; the balance of £154,000 was met by bank overdraft.
CIE's financial difficulties show no sign of improvement this year. It is at present estimated that the board will have a net deficit of £6 million— i.e. £3.35 million in excess of the board's annual grant—in the current financial year.
The consultants, McKinsey & Co., who recently completed an investigation into the deterioration in CIE's financial position, found no scope for immediate significant savings. Major savings which they do envisage will take about five years to achieve. It is not my intention, however, to deal here with the McKinsey Report—that is another's day's work. When decisions have been taken by the Government on the consultants' recommendations, long-term legislation will be introduced to deal with CIE's problems. In the meantime, it is necessary, as a matter of urgency, to meet CIE's cash shortfall in the current financial year and there is no alternative to further financial assistance being provided by the Exchequer.
Provision is being made, therefore, in the Supplementary Estimate for payment to CIE in the current financial year, in the form of non-repayable grants, of £4.464 million made up as follows: £3.350 million in respect of the amount by which the board's statutory annual grant of £2.65 million is expected to be inadequate in the current financial year; and £1.114 million in respect of interest due by CIE to the Exchequer on capital advances under section 4 of the Transport Act, 1964, payment of which, as I have already indicated, was deferred to enable the board to meet its cash shortfall in 1969-70 and 1970-71.
The latter payment is necessary as the interest payments due were charged to CIE's accounts for 1969-70 and 1970-71 and contributed to the board's losses in those years. They remain a liability on the board and it is desirable that the board should be given sufficient funds to enable the liability to be discharged.
I should also mention that further interest payments amounting to £804,000 will fall due for payment by CIE to the Exchequer in the current financial year, bringing the total interest due up to £1.918 million. Deputies will appreciate, therefore, that while the Supplementary Estimate provides for payment of £4.464 million to CIE, the net draw on the Exchequer will amount to only £2.546 million.
I now turn to shipping. In the cross-Channel trade we have seen within the past decade a rapid changeover from conventional multi-purpose ships to car-ferries, container and other unit-load ships, roll-on/roll-off type freight operations and specialised vessels of all kinds. Even the pattern of shipping services has changed. The trend has been towards a concentration of routes and services through a limited number of ports on the east and south-east coast. The greater use of unit-load methods of shipping in the cross-Channel trade and the mass movement of goods by a decreasing number of services have provided economies in operating costs, the benefits of which have been passed on to shippers.
Since the takeover of the B & I Company in 1965 the company's entire structure of services has been transformed. Formerly passengers, livestock and loosestow cargo were carried in conventional multi-purpose ships. Passengers and cars are now carried on modern car-ferry vessels which also cater for a growing demand for roll-on/ roll-off traffic, while the use of specialised container vessels enables the company to provide a streamlined "door-to-door" freight service.
In 1970 the B & I Company's trading results showed a marked improvement over the preceding year. Gross profit increased from £480,000 in 1969 to over £1 million. Net profit rose from £8,973 to £158,879 and this figure is expected to improve further in the present year.
The company's modernisation programme involved heavy capital investment and loan capital had risen to £5.5 million at the end of 1970. Deputies will recall the British and Irish Steam Packet Co. Ltd. (Acquisition) (Amendment) Act, 1971, which was passed earlier this year to enable the Minister for Finance to take up an additional 3,000,000 shares in the company. This measure should help to reduce the imbalance between the company's loan and equity capital which, until this year, had remained at £1.6 million.
The House will recall that in April, 1970, I initiated a review of the policies of the State companies concerned with cross-Channel freight transport. The B & I Company and CIE have agreed on objectives to preserve the national investment in the State companies engaged in the cross-Channel trade. Agreement in principle on rationalisation of shipping operations between British Rail and the B & I has also been reached. Detailed discussions on the full implementation of rationalisation measures are proceeding between these companies. On the car-ferry operations certain measures of agreement have already been reached.
On the livestock side the B & I and British Rail reached agreement in 1970 on rationalisation. The agreement provided certain assurances on the continuity of livestock services up to 1975 with a possibility of their extension for a further five years. Representation for the livestock industry on the board of the operating company, the Irish Livestock Transport Company set up by the B & I and British Rail, has given the trade a voice in the operation of livestock shipping services for the first time. However, the company has had a difficult year in 1970 due to the problems arising from the closing of the Menai Bridge and the failure by the cattle trade to support the company's Heysham service. As a result, the latter service is being withdrawn. I have had discussions about the future plans of the Irish Livestock Transport Company with representatives of the company and will also be meeting representatives of the cattle trade.
In April last, the B & I Company inaugurated, in partnership with the Holland/America Line, a new continental freight service linking Cork and Dublin with Rotterdam and Le Havre. This service was initiated following the cessation of the services operated previously by the Hibernian Transport Group. This service, which has special significance in view of our possible entry to the EEC, is operating satisfactorily.
Irish Shipping Ltd., which operates in the deep sea trade, had its most successful year to date in the twelve months ended 31st March, 1971. The company has a fleet of nine vessels of a total deadweight of 180,000 tons.
In 1970 the company acquired two new bulk carriers, each of about 29,000 tons deadweight. One of these two ships, the Irish Stardust, was built for the company at Verolme Cork Dockyard. Advantageous long-term charters were negotiated for both vessels. In July, 1970, Irish Shipping Ltd. placed an order with the Upper Clyde Shipyards for 4 bulk carriers each of about 26,000 tons. Prior to placing this order, the company had consultations with Verolme Cork Dockyard, but because the Cork yard had a full order book they were unable to accept the order. When, in June of this year, the Scottish shipbuilders went into liquidation the contract for the four bulk carriers was placed in jeopardy. Irish Shipping Ltd. have, however, now secured from the British Government satisfactory guarantees relating to the contract for the ships.
The company's net profit, after charging full depreciation and taking all other charges into account in the normal commercial manner, increased from £508,000 in 1970 to £851,000 in 1971. Because of a major slump in world shipping rates—rates are now at their lowest since the company was originally established—lower profits are expected in the current year.
Since the announcement by Normandy Ferries that they proposed to terminate the Rosslare—Le Harve car ferry service, Irish Shipping Limited have been exploring all possible avenues with a view to providing a substitute service, even on a limited basis, for 1972. So far, their efforts have not proved successful but their negotiations are continuing. They expect to know the final position shortly. The smaller shipping companies in the private sector provide for shippers a wide range of services, including container services to European destinations.
The Government recognises that privately-owned shipping concerns have a continuing and important role to play on the Irish Sea and on sea-routes further afield. The tonnage of such Irish-owned shipping is, however, small, and, due to a number of factors, has been decreasing. The reasons for this decline include the heavy investment involved in the use of container ships, and the necessity to provide for intensive utilisation of vessels operating at high frequency between a restricted number of ports. On the longer sea-routes to Britain from west and south coast ports a number of services have been discontinued. This trend towards concentration of services through a decreasing number of ports, while it benefits the importer and exporter, is prejudicial to the smaller shipping companies and the west coast ports but is a universal feature of short-sea shipping at the present time. These factors contributed in a large degree to the financial difficulties which led to the liquidation of the Hibernian Transport group of companies, among which were the old-established shipping companies of Limerick Steam and Palgrave Murphy Limited.
I am aware of recent criticism of existing maritime legislation which, it is alleged, is adversely affecting the operations of the smaller native shipping companies. Revision of this legislation is in hands now and the views of shipowners and trade unions on this subject, which were invited some time ago; are still awaited.
The Shipping Investment Grants Scheme which was withdrawn recently was introduced in 1969 with retrospective effect to 1st April, 1967 at the instance of the Irish Shipowners' Association, in order to place Irish shipowners on a competitive footing with British shipowners who already had the advantage of a similar scheme.
The scheme enabled shipowners to obtain grants of up to 25 per cent of the cost of capital expenditure on new ships or new equipment for ships. Grants totalling £4 million have been authorised under the scheme for Irish shipping companies. Nine new vessels have been added to the Irish Shipping Register and four older vessels modernised with grant assistance.
Earlier this year, in consultation with the Minister for Finance, the working of this scheme was reviewed. Having regard to the fact that the corresponding British scheme had been withdrawn in October, 1970, as well as to the many demands on the limited financial resources of the Exchequer and the limited use which our private shipping companies had made of it, retention of the scheme was no longer justified.
The principal commercial harbours are managed and operated by harbour authorities set up under the Harbours Act, 1946. Members of the authorities are elected every five years and are representative of users of the harbours, local authorities, commercial and labour interests, some members being nominated by me. My powers in relation to harbour authorities are somewhat similar to, but not quite as far-reaching as, the powers exercised over local authorities by the Minister for Local Government.
Each authority is statutorily responsible for the management, control and operation of its harbour and is obliged by statute to provide reasonable facilities for vessels, goods and passengers using the harbour. Government policy in regard to harbours envisages that they be operated as commercial undertakings and be self-supporting.
The recent revolution in shipping brought about by containerisation, roll-on/roll-off services and specialised ships, has necessitated the extension of facilities at some of our major harbours including new roll-on/roll-off and container developments at Dublin, modernisation of Cork Harbour at Tivoli, the provision of container installations at Waterford and quay reconstruction at Galway and Foynes designed to facilitate the export of ore concentrates. State grants in recent years have recognised the need to assist harbours in catering for the new demands and in the year 1971-72 I am providing £350,000 for grants towards various harbour works mainly to meet the new requirements.
Attention was drawn in the recent White Paper on Local Government Reorganisation to the fact that a number of our smaller harbours which are at present subject to the wide-ranging controls of the Harbours Act, 1946, have little commercial traffic. The White Paper accordingly suggested that these harbours should be removed from these controls and transferred to the appropriate local authorities who may be better able to ensure their development. I would welcome reactions from the House to that suggestion.
Next I come to tourism. The original allocation for tourism for 1971-72 was £6.23 million. The industry benefited to the extent of £1.25 million from the additional capital allocations recently announced by the Minister for Finance to provide a stimulus to economic activity and to encourage business confidence. This has brought the allocation to £7.48 million for the current year, which represents an increase of £1.93 million on 1970-71. The allocation includes the special provisions for accommodation and resort development grants and the grant-in-aid to meet Bord Fáilte's operational activities, including marketing.
As I have explained to the House on a number of occasions, Bord Fáilte have not been taking on new grant commitments in respect of hotel and guesthouse development since mid-1969. In the meantime the moneys voted for holiday accommodation grants have been used by the board to reduce the backlog of grants due to developers. The original allocation for accommodation grants in 1971-72 was £1.8 million. This is being increased by £1 million, bringing the total allocation for this year to £2.8 million. This £2.8 million will enable Bord Fáilte to effect a considerable reduction on their outstanding commitments. There will be still some arrears of grants due but these should be cleared in the course of the coming year. I know that the additional moneys I am providing will bring significant relief to many hoteliers and guesthouse owners who had to meet interest charges on borrowing incurred pending payment of their grants. I hope that payment of the grants will enable hoteliers to allocate increased moneys for marketing and promotional work for the 1972 season.
Bord Fáilte are availing of the pause in the taking on of new commitments to give consideration to the overall tourist accommodation position. The board are examining the situation in the light of the findings of a consultancy report and other relevant factors and will, in consultation with all interests concerned, formulate proposals about the accommodation needs of the future and the means by which accommodation development should be pursued.
The provision for supplementary accommodation grants in western counties has again been fixed at £100,000 this year. This expenditure is very effective in extending tourism through-our rural areas in the west and in helping farmers and small householders to share directly in the benefits of tourism.
The remaining £250,000 of the additional £1.25 million recently allocated for tourism will be spent on major resort development and will bring the total resort allocation for this year to £500,000, an increase of £100,000 on last year. Adequate recreational facilities are essential for the extension of Irish tourism and it was to meet this need that the major resort development programme was inaugurated under which Bord Fáilte, in association with local authorities and other local interests, undertake development works in selected centres and areas. At the 31st March, 1971 the board had expended £2.7 million towards projects costing over £4 million. The recent increase in the current year's provision will enable the board to undertake additional development works during the remainder of this financial year and I know that this will be welcome to public representatives and tourism interests.