Dáil Éireann debate -
Tuesday, 16 Dec 1975

Vol. 286 No. 10

Industrial Development (No. 2) Bill, 1975: Committee and Final Stages.

Section 1 agreed to.

SECTION 2.

Minister for Industry and Commerce (Mr. Keating)

I move amendment No. 1:

In page 2, after line 45, to insert the following:

"(c) In relation to a guarantee referred to in paragraph (b) of this and the preceding subsection in money in a currency other than the currency of the State, the references to principal in those paragraphs shall be taken as referring to the equivalent in currency of the State of the actual principal, such equivalent being calculated according to the cost in the currency of the State of the actual principal at the time of the giving of the guarantee."

Under section 37 of the 1969 Act the authority have power to give guarantees in a currency other than that of the State. Since in section 2 (2) (b) of this Bill the limit on guarantees of principal is expressed in sterling, it is necessary to have a provision which regulates the calculation of the equivalent amount in the currency of the State of a guarantee given in another currency. This amendment provides that in calculating the aggregate amount of the guarantees, amounts guaranteed in a currency other than Irish £s shall be converted into £s at the exchange rate obtaining on the day the guarantee was given. This will obviate any danger that the aggregate of guarantees given could be pushed over the statutory limit by a change in exchange rates.

Mr. O'Malley

It would appear that the net effect of this would be somewhat to reduce the value of guarantees given by the IDA in circumstances where they were given in non-sterling currencies. I am afraid it will be looked at in that light by those to whom the guarantees are given in respect of borrowing. I think it best to explain what appears to be the meaning of this amendment by way of example rather than in the manner in which the Minister explained it. No doubt it was correctly explained but it was rather technical.

The example that one might give is the one frequently given in relation to the depreciation of sterling since the agreement of December, 1971 when it was arranged to float the £ sterling against what is known as a basket of currencies under the arrangement that is described as the "snake". This agreement was concluded in Washington in December, 1971 and the net effect since then has been a depreciation in sterling of 30.2 per cent up to a few days ago, although it may be slightly higher or lower today. Someone borrowing in non-sterling currency on the basis that he would have to repay in the currency in which he borrowed, and assuming that he borrowed £1 million in December, 1971 and that he were to repay it today on that basis, would have to pay back £1,320,000. Of course, that would be exclusive of interest which he would have had to pay in the meantime and the interest payments would be subject to a corresponding depreciation.

I assume the purpose of the amendment is to protect the IDA against the continuing inflation or depreciation of the Irish £ and sterling as against non-sterling currencies by providing that if they guarantee a loan of £1 million today to an industrial promoter they will not be called on to repay more than £1 million when the loan becomes repayable and if their guarantee is called into effect. I assume their liability to repay will not exceed £1 million, at any rate in Irish currency irrespective of whatever depreciation may take place on the part of sterling as against non-sterling currencies.

For that reason I welcome the amendment in so far as it protects the funds of the IDA in a way that they might not otherwise be protected. We are entitled to inquire if the IDA, having given guarantees in non-sterling currencies in the past, potentially are caught if called on to honour their guarantees, with the repayment to the lender of more than the original amount lent because of depreciation in sterling as against the basket of currencies.

Mr. Keating

The Deputy has correctly seized the kernel of the amendment which is that the £ has been sinking quite dramatically and the old circumstance which people were used to, of fixed parties, has disappeared but the conclusion reached by the Deputy is not the correct one. The intention of the amendment is a little different and I will try to indicate more fully that intention.

Guarantees given in other currencies are not necessarily reduced in value. For example, if there is a farm that is putting in a certain piece of equipment made in Switzerland—a hard currency country—the loan to purchase the equipment may be in Swiss francs and it might need to be guaranteed in that. It might need to be guaranteed in many currencies. The guarantees, up to the limit of £100 million, are cumulative. The great majority of them will be in sterling but if you have a circumstance where there is already an accumulation of guarantees up into a sum of £90 million and some of those guarantees are in currencies other than sterling, if the value of the sterling equivalent of the non-sterling guarantees is to be calculated on the fluctuating rather than on the fixed rate, then some day, with no new guarantees given, simply by a change in the value of sterling you could find you had gone over your £100 million limit. It is the opinion of some of the legal experts who have looked at this that if your limit of £100 million is burst by that fluctuation in exchange rates, then all your guarantees become invalid. This is a mechanism to prevent fluctuations in the tot from taking place so that you always know exactly where you are. There are no guarantees at present in non-sterling currencies, but if there were downward floats, then the IDA would pay the amount even if that was a larger amount than the amount borrowed. This is one of the dangers of guaranteeing in currencies other than one's own, at a time when one's own is weak, but the point of the amendment is to ensure the legal validity of all of the guarantees given.

Mr. O'Malley

Could the Minister tell us the total amount of the guarantees that have been made up to now?

Mr. Keating

Forty million pounds.

Mr. O'Malley

None of these is in non-sterling currencies?

Mr. Keating

No, there are no non-sterling ones at present.

Mr. O'Malley

The Minister will agree the amendment could also— assuming guarantees are given from now on in non-sterling currencies— have the effect of limiting the potential liability of the IDA to the value of the loan in sterling as on the day that it was guaranteed and that the IDA would not become liable for any repayment over and above the nominal value in sterling of the guarantee, even if there was depreciation against sterling in the meantime?

Mr. Keating

I speak subject to correction, but I understand that that is not the opinion, that the purpose of this amendment is to provide that the guarantee shall be computed with an equivalent in sterling of the value of the non-sterling guarantee on the day on which it was given, so that the limit of £100 million is not burst through inadvertently, but that does not exclude the possibility that if there is a dramatic down float of the pound that, in the case of a guarantee being defaulted on in a non-sterling currency, the IDA might have to pay back more than the face value in sterling of that guarantee at the original time that the guarantee was negotiated.

Mr. O'Malley

Even though this amendment is made?

Mr. Keating

Yes.

Mr. O'Malley

Would the Minister not agree that while the object of the amendment as stated by him, to prevent an iadvertent excess over the statutory limit of £100 million is of some importance——

Mr. Keating

An inadvertent invalidation of all guarantees in that case; that is the danger.

Mr. O'Malley

Yes, which would validate all guarantees. While that is undoubtedly of importance, is it not equally important from the IDA's point of view and from the national point of view that the IDA should not be stuck in this position, that, if in the example I have given, they had guaranteed in December, 1971, a loan of £1 million, and are called on in December, 1975, to honour the loan—this is of course assuming the loan is in non-sterling currency—in order to honour it they would have to pay the lender £1,320,000 in sterling? Would the Minister not take the opportunity, as the two matters are so closely connected, to extend this amendment to cover that situation as well as the situation of the inadvertent excess of the total number of guarantees?

Mr. Keating

I see the objective the Deputy is aiming at, but I am unwilling to restrict the IDA in this matter. Everyone who has been dealing with borrowings or guarantees— and this is an important distinction, because we are now talking about guarantees and not about IDA loans— recognises that many sterling borrowers have been caught in the last four years and caught desperately, but the IDA are aware of this, and they will drive the best bargain they can. In other words, if they can secure acceptance, either with regard to a guarantee or a loan, of repayment at a fixed rate, they will certainly take that course, but I am unwilling to bind them—and they have done this —to do so in all cases. I want to give them the flexibility, if there is no way out, if they are cornered into guaranteeing repayment in the currency in which borrowing is made, regardless of the fluctuation of sterling, of being able to do that. They are very well aware of the danger, but the guarantees in this case are merely guarantees of loans and not loans. Normally in the region in which we are working, with the scale of firms with which we are working and taking the suppliers with whom we are working, the default and, therefore, the necessity for our agencies to honour that guarantee is very much the rarity and is something that is not part of the normal scheme of things at all. As I say, it is a guarantee and not a loan itself.

Mr. O'Malley

If from now on the IDA are to give guarantees in non-sterling currencies, and assuming— and we have got to assume when we are discussing a thing like this—they are called on at some stage to honour at least some of their guarantees, would the Minister take into account the position the IDA will be in if there is a major collapse of the British economy, which is not impossible. There may be a further devaluation of the £ sterling. If things do not improve in Britain, it could be 20 to 25 per cent in a year or two. Does the Minister realise the position the IDA is put in? It may have a huge excess to repay over its original guarantee. Would it not be better to bind the IDA by statute to repay only what it guaranteed originally in sterling?

Mr. Keating

I see the point of the Deputy's remarks, but since 1971 sterling has been going down and down. The catastrophe that he speaks of is possible but it is also possible— and there are people speculating on it at the moment—that the £ is as low as it is going to go and that it is going to rise. If we did not allow this variation in parity either way, we would then prevent the IDA from benefiting from the strengthening of the £, if it strengthens. We would lock them to repaying at the exchange rate which is now as disadvantageous as it is ever going to be, right at the depths of the devaluation of the £. If the British economy steadies, and if the North Sea oil produces the boost for the British economy that is anticipated, then the £ will harden from here on out and the amount of actual repayments will be less. The IDA is well aware of this problem. I am advised that the expert opinion is that we should leave it without tying them either way.

Mr. T.J. Fitzpatrick

(Dublin Central): How will the IDA be able to keep within this figure? I think the Minister would be tying them rather tightly, with guarantees given to the extent of, perhaps, £90 million. Taking fluctuations into account and assuming another 10 per cent devaluation, could this not drive the IDA outside this bracket? Does the Minister follow the point I am making? How would the IDA get out of this situation?

Mr. Keating

I follow the thought, but I would refer the Deputy to the final subsection of the amendment, which reads:"...such equivalent being calculated according to the cost in the currency of the State of the actual principal at the time of the giving of the guarantee". In other words, on the day the guarantee is given, even though we know that subsequent fluctuations will take place between the £ and the currency of that State—maybe to the disadvantage of the £, maybe to its advantage— for the sake of calculating this guarantee limit the amount will be taken as on the day the guarantee was given. In that way—and this is the whole object of the amendment—you stop those fortuitous fluctuations from obtruding and possibly bursting a guarantee. Because it is frozen as of the day it is given, it cannot fluctuate in the total.

Mr. T.J. Fitzpatrick

(Dublin Central): Will this be to the advantage of the investors? As Deputy O'Malley said, there could be a devaluation of 25 per cent. Does the Minister not think people who have taken up these guarantees will be demanding full repayment in currencies equivalent to their currency?

Mr. Keating

Repayments of guarantees or repayments of loans have to be made according to the terms calculated and negotiated. If the terms are negotiated taking account of fluctuations, then one must pay taking account of fluctuations. If they are calculated at fixed exchange rates, one pays the fixed exchange rate. I said I was unwilling to tie the hands of the IDA because I want them to be free to choose whatever they think is the correct thing to do. They are experienced and their failure rate is extremely low. They are well aware of the difficulties. We have put in this amendment at their request because of a difficulty they visualise if it were not there.

Amendment agreed to.

Mr. O'Malley

I move amendment No. 2:

In page 2, after line 45, to add the following subsection:

"(4) Not less than 50 per cent of the aggregate amounts of grants referred to in subsections (2) (a) and (3) (a) of this section payable after the passing of this Act, shall be paid to Irish citizens or Irish controlled companies."

The purpose of this amendment is quite clear. It seeks to have 50 per cent at least of the various grants referred to in section 2, which will be payable in the future, paid to Irish controlled companies. The reason I put down this amendment, as I stated at some length on Second Stage, is that, in common with many people, I am a bit disturbed at what appears to be the low rate of participation of Irish entrepreneurs or industrialists in our industrial drive over the past 20 years. Since the late 1950s there has been a major effort to attract foreign industry, a very commendable effort, an effort which in its time, and up to quite recently, was eminently successful, and the wisdom of which one could not question.

In the past couple of years due to various circumstances things have changed. I believe, and this Party believe, that a far greater proportion of our new industries could be Irish owned, Irish controlled, or have a much larger Irish content than they had hitherto. There are a number of reasons for this. One is that there has been a recession which caused foreign companies to be less anxious to stay in Ireland if their whole group were running into difficulties. Secondly, because of the industrial policies which have been followed successfully in the past, including the attraction of a large amount of foreign industry, the necessary skills, the necessary experience, and so on, are now available in Irish hands to a much greater degree than was the case in the past.

The necessity for the heavy predominance of foreign participation in our industries, and in particular in our new industries, is much less that it was in the 1950s, the 1960s, and, perhaps, even in the early 1970s. I believe active encouragement should be given to the IDA to seek to promote in so far as they possibly can Irish enterprise and Irish controlled industries. The Minister will probably tell me they do this already as best they can. While it would not have been appropriate in the past, some form of statutory obligation is very arguably appropriate in the future.

I am not tied to the figure of 50 per cent, although it seems a reasonable one. If the Minister were prepared to accept the principle of what I am saying, I would be quite happy to see it reduced to 40 per cent or 35 per cent if he or the IDA thought it was necessary to reduce it in that way, and, perhaps, in five years' time or so, we could increase it to 50 per cent. I am in no way tied to that figure but I am tied to the idea that a fixed percentage of our new industrial enterprise every year should be under Irish control and should be on the part of Irish citizens.

I endeavoured to obtain from the Minister the figures of the grants paid in the past five years to Irish citizens and Irish-owned companies on the one part and foreign citizens and foreign-controlled companies on the other part. I had a question down for oral answer today and it was not reached. I took the written answer which is:

Apart from the difficulty of defining the terms used in the Deputy's question, information is not available in the form in which he has asked for it.

However, I have been informed by the IDA that the amount of capital grant payments made in respect of new industrial projects initiated by foreign promoters from 1st April, 1970, to 31st December, 1974, the latest date for which information is available was £48.237 million, while the corresponding figure in relation to new projects initiated by undertakings within the country was £14.026 million.

It goes on to talk about re-equipment and adaptation grants which are not quite relevant to this point.

I worked out roughly the proportion of these two figures and it is 3½1. From my reading of the Minister's reply, I am afraid this is not a full reflection of the actual position because the Minister does not state that the £14.026 million was given to Irish-controlled companies or Irish citizens. He said it was given in relation to new projects initiated by undertakings within the country. That suggests to me that any existing factory is included in that figure. As we know, a high proportion of our existing factories is foreign owned or foreign controlled. Therefore, the actual figure I was looking for in relation to Irish citizens or Irish-controlled companies may well be only half of that £14 million or could even—I do not know: I am only speculating—be substantially less than half of it.

Inevitably in recent years many of our grants were given to foreign projects which were already established within the country. A good factory were going ahead and employing 100 or 200 people and they decided to have another one to expand their existing factory substantially. For example, EI in Shannon, which had a big factory, opened one in Galway a couple of years later. Scripto in Shannon opened a factory in Limerick. There must be many other examples such as that. Therefore, the proportion of 3½1, when you analyse it, is probably more likely to be about 7:1 or 8:1 in favour of grants to foreign-owned or controlled projects as against Irish-owned projects. I fully accept that in the 1950s or the 1960s that kind of proportion was inevitable because we did not have the tradition, expertise, capital, experience and the enterpreneurs to enable our citizens to take up a higher proportion of the grants available.

It is very disturbing that in the years from 1970 to 1974 Irish citizens seemed to be getting only one-eight, or perhaps less, of what is going in terms of industrial grants under all these various Acts and sections that are set out here. The time has come when this House should, through statute, compel the IDA to ensure that a higher proportion than was so in the years between 1970 and 1974, should now be reserved to and paid to Irish enterprise. They may well say that Irish enterprise would not be able to take it up. If they got the necessary encouragement I believe they would be able to take it up, even if not to the extent of 50 per cent, as set out in my amendment, which is a fairly pious hope, at least a much higher proportion than the one-eight or one-ninth which they were able to take up in the five years we have been talking about.

I am primarily concerned here with the principle of the amendment rather than the actual percentage. I would be happy to withdraw it if the Minister was prepared to say that he would substitute a different amendment with some lower percentage but nonetheless would give a guarantee to Irish enterprise and place an obligation on the IDA to start looking around at home perhaps to a greater extent than they have been doing up to now.

Mr. Keating

I appreciate the purpose of Deputy O'Malley's amendment. For reasons that I hope will be clear to the House I hope he will not press it. I understand its motivation and I agree with very much of what he said now. It serves a useful purpose that we can have this exchange about it. I will certainly draw the contents of the exchange to the attention of the Industrial Development Authority. We have, regardless of what percentage is written in, some genuine difficulties here which I would like very briefly to tease out.

An amendment, regardless of the percentage, whether it is 50 per cent or another percentage, which makes an explicit differentiation in favour of Irish firms is basically contrary to the Treaty of Rome and the Accession Treaty. It is contrary to the fundamental treaty of the Community, to Articles 7,58, 90, 92 and 93, I am informed. Let me, without going into the fine print of this, indicate the general drift, because a quotation from Article 3 says:

Any discrimination on grounds of nationality shall be prohibited.

The other articles flesh that out. Article 58 says:

Companies or firms formed in accordance with the law of a member State within the Community... shall, for the purpose of this chapter, be treated in the same way as natural persons who are nationals of member States.

That obviously extends to firms the prohibition on discrimination set out in Article 7. That makes one of the formal difficulties to our accepting the amendment. If we passed this amendment we would immediately have it struck down by the Commission. There is not a shadow of doubt about that. I have no particular pleasure in telling the House that that is the way it is.

There are other difficulties also. When we talk about foreign firms we all think of the firms who have come in here in the last 20 years, but because of the relationship of Irish industry with the UK in the past those that we think of as perhaps most indigenous, most Irish, are not Irish. Guinness is an example. That firm would have to be counted in the non-Irish category as also would Fry-Cadburys, Rown-tree-Mackintosh and other firms like that. A lot of the food sector would have to be counted in this category.

Deputy O'Malley deplored the low rate of participation by Irish entrepreneurs. I share that feeling of his, the same as everybody does. I have done my utmost, through small industry promotion, through finding new enterprise and through the enterprise and development of the IDA, to direct the IDA towards Ireland and small industry. Part of the answer is that it is not possible legally. There is also the answer that it is not a good thing to do either if one thinks of the practicality.

One must think over what period of time one keeps one's totals. Are they simply running totals? Do you do it day by day? In some cases, where a grant is approved the final payments may not be made for six or seven years. Some things are paid very quickly. There is a genuine technical difficulty. The big difficulty is that in the middle of very good times, when you could create jobs at a rate that to go any faster would disrupt your economy, you could get selective. While I agree with Deputy O'Malley's basic thinking I have to say that to turn away any source of jobs from anywhere would be a mistake and something I could not go along with. Deputies on all sides of the House represent constituencies all over the country. I believe that all constituents would answer the same way. They would say that provided the industry is firmly based, that it is not crooked or shady, provided it is a good industrial job with a future growth, they would accept it from whatever source it comes and be very glad to get it. I must say in the middle of a depression that is also my opinion.

I believe the way to get over this is not by putting any sort of statutory limitation on how much goes to non-Irish sources. With company law and the structure of ownership now, even the determination of what is an Irish source and what is an non-Irish source is genuinely difficult. Deputy O'Malley has more legal experience than I have and he knows that I am not inventing that as a difficulty just to throw something out. It is also quite hard to identify the ultimate ownership and to make decisions about whether it is Irish or not. Even granting that you could do that, that you could keep a tot, that you could get past the Community objections, the job is not to make statutory limitations either way but simply to use all our ingenuity to promote Irish growth.

I am informed by the IDA that the reasons for turning down Irish applications are because they are in sectors already overcrowded and where they are very poor risks, that Irish applications are not turned down for want of funds by the IDA. It is not an either/or. If we were diverting the funds away from Ireland to foreign investment and we could get the Irish investment by diverting them back, I would agree that we would have to think differently. That is not the case. Irish investment is not starved for want of funds. If more of a sound kind were to come forward more could be funded. It is not a robbing of one to serve the other. Therefore, I believe the correct task at the moment is to keep both the Irish indigenous and the foreign going as fully as possible. This has been a very useful exchange and I agree with the basic sentiment.

The task is to think up mechanisms by which Irish Industry can be favoured within the context of the limitations of our Accession Treaty with the EEC which is very rigorous on the subject of avoiding any advantage to any nation. I think we must do it by promotion and stimulation. I am informed that no project from an Irish source is refused on the basis of shortage of funds. Once I am guaranteed that, an amendment of this kind is not necessary and could be counterproductive because we could lose useful investment.

Mr. J. O'Leary

In recent years there has been grave dissatisfaction about the allocation of grants by the IDA to various firms, foreign or native. It is almost impossible also for an Irish concern to get off the ground at the moment—and especially in the case of small industrialists employing fewer than ten or 15 people by getting a grant from the IDA unless they can show a huge profit in the past few years. This means jobs are lost and the would-be promoter loses confidence not only in the IDA but also in the Government and the country. There appears to be a certain amount of talk and even clarification by the Government indicating they intend to phase out county development teams.

An Ceann Comhairle

The Deputy is injecting new matter.

Mr. J. O'Leary

It is very relevant to this amendment.

An Ceann Comhairle

The Chair will decide that. I should like the Deputy to confine his remarks to the amendment, which seeks to ensure a higher proportion of grants for Irish industrialists vis-á-vis foreign industrialists. What the Deputy is now referring to is not in order.

Mr. J. O'Leary

The county development teams——

An Ceann Comhairle

I trust the Deputy is not trying to circumvent the ruling of the Chair.

Mr. J. O'Leary

I shall certainly support the Chair. The county development teams always promote home industries and support the local individual who sets up an industry and makes a success of it. It is unfortunate that such proposals very often fall on deaf ears when it comes to the IDA and the Minister for Industry and Commerce. It is well known that the Government intend to phase out the county development teams and, as I said previously——

An Ceann Comhairle

The Deputy seems to be embarking on a Second Reading speech and that is not in order at this Stage. He must confine his remarks to the amendment in the name of Deputy O'Malley.

Mr. J. O'Leary

County development teams should be fully supported and should not be phased out at this stage of our development. It is well known that a native industrialist must show a profit in previous years before he can get a grant from the IDA. I consider that is wrong. When an individual or a group have a good proposal which they can show could make a profit and would be of service to the people and that they would employ more workers as time went on, the IDA should give them a grant. Many chances were taken in the past with foreign industrialists but now and in the future we should give our own people a reasonable chance. If we do not trust our own, how can we trust a foreign industrialist?

I am very much in favour of foreign industrialists coming here to set up industries with all their know-how and technical knowledge and I do not want to be misunderstood on that score. But it is also a fact that in all counties there are people who have local knowledge and skill and who want to set up industries and they should not have to fight their way through the county development teams, which the present Government are inclined to knock, right up to the IDA and then be refused a grant. They must then set themselves up on bank loans at 15 per cent or 20 per cent or through hire purchase companies at 20 to 25 per cent. After three or four years when they have proved themselves they can get a grant—and only then—from the IDA. The sooner this situation is changed the better. The IDA should make grants available to local authorities——

An Ceann Comhairle

The Deputy is going beyond the scope of this amendment. He is making a Second Reading speech.

Mr. J. O'Leary

The amendment proposes that not less than 50 per cent of the aggregate amount of grants referred to in subsections (2) (a) and (3) (a) of this section payable after the passing of this Act, shall be paid to Irish citizens or Irish-controlled companies. I maintain that members of local authorities are Irish citizens——

An Ceann Comhairle

I have allowed the Deputy some scope in referring repeatedly to county development teams and so on, but he may not develop his speech on those lines. It would not be in order.

Mr. J. O'Leary

I do not intend to do so. A certain proportion of these grants should be payable to local authorities for a number of reasons. First, local authorities provide the infrastructure for industry or they should be providing it.

An Ceann Comhairle

This is essentially new matter which the Deputy is injecting into the amendment. He will have to confine his remarks to the amendment and he may not embark on a Second Reading speech.

Mr. J. O'Leary

I do not intend to do so but I believe that the IDA should pay an annual grant to each local authority and particularly to each planning authority to cover the cost of infrastructure for industry, such as water, sewerage and environmental problems.

An Ceann Comhairle

I cannot allow the Deputy to develop his speech along those lines.

Mr. J. O'Leary

I will not do so. It is well known that industrialists who get the grants from the IDA have no interest in environmental development and environmental problems. It is also well known that they will not contribute and are not expected to contribute to local authorities in respect of water, sewerage, roads and environmental projects. The time has come when the Minister should seriously consider asking the IDA to pay grants to local authorities to provide the infrastructure for industries. That comes well within the scope of Deputy O'Malley's amendment.

An Ceann Comhairle

I have ruled against that, Deputy. I have allowed the Deputy sufficient latitude; he must not continue along those lines. If the Deputy is not going to relate his remarks precisely to the amendment, I shall have to ask him to sit down.

Mr. J. O'Leary

The Minister stated recently that no Deputy would influence him in so far as the location of industries was concerned. This also concerns the amount of grants payable to industrialists. That is not correct. Deputies should have a say as to where a case can be made——

An Ceann Comhairle

I am afraid the Deputy has chosen the wrong time to make a Second Reading speech. I must ask him to desist. This is the Committee Stage of the Bill. We are dealing with a specific amendment. The Deputy has been making a Second Reading speech and I cannot allow him to continue.

Mr. J. O'Leary

With due respect, the amendment states that not less than 50 per cent——

An Ceann Comhairle

I have given the Deputy every latitude; he cannot be allowed any more.

Mr. J. O'Leary

Unless 50 per cent approximately of the aggregate amount of grants is payable to local enterprise I believe we may fail in the industrial development of this country. With 109,000 people unemployed here at present—it being very likely that 130,000 to 150,000 may be unemployed within the next six months —much as we all dislike it, unless this amendment is accepted—that will become a fact.

The Minister should take into account representations made to him and the IDA in turn should take into consideration representations made to them as regards the location of industries.

An Ceann Comhairle

I shall have to ask Deputy O'Leary to desist. He has sought to deal with so many matters unrelated to this amendment, I shall have to ask him to desist.

Mr. J. O'Leary

I will desist. In taking into account the 50 per cent or so of the aggregate amount of grants referred to in Deputy O'Malley's amendment, I would ask the Minister to ensure that these include grants payable to local authorities for infrastructure, such as water schemes, sewerage schemes, roads——

An Ceann Comhairle

This is not in order and the Deputy knows that.

Mr. J. O'Leary

——pollution and so on.

An Ceann Comhairle

That is not in order, Deputy.

Mr. J. O'Leary

I shall revert to where I started.

An Ceann Comhairle

I do not think the Deputy should repeat himself either.

Mr. J. O'Leary

I do not wish to repeat myself but I believe——

An Ceann Comhairle

I do not wish to seem to be harrassing the Deputy but he is completely out of order and must know it.

Mr. J. O'Leary

Of late I believe there is grave dissatisfaction amongst the public generally, particularly those involved in industry here, regarding the allocation of grants by the IDA. I say that without fear or favour. Whether or not the Chair stops me I shall say it, and I say it again: there is grave dissatisfaction throughout the country at present amongst industrialists, particularly Irish industrialists, regarding the allocation of grants by the IDA and by the Minister for Industry and Commerce.

I think the Minister is merely bluffing by referring to EEC directives and regulations. It is a well-known fact that EEC directives were changed at the instigation of the Government quite recently on at least one occasion, if not on a few occasions, and for good reasons too. I congratulate the Government on having done so. I see no reason why we should be bound to the EEC where the jobs of 150,000 of our people are concerned. The Italians did not do so. There is no other country within the EEC that would bow to rules and laws where the jobs of 150,000 of its people were concerned.

It is a well-known fact, of course— and I am sticking strictly to the terms of Deputy O'Malley's amendment— that one cannot have industry without its attendant services, water, sewerage, roads, without the infrastructure——

An Ceann Comhairle

The Deputy is getting away from the amendment, and very much so.

Mr. J. O'Leary

I am not. I am sticking strictly to the amendment by Deputy O'Malley. I maintain that one cannot have industry without services such as roads, water and sewerage, without the proper environmental control, so vital to a young country such as ours.

An Ceann Comhairle

If the Deputy cannot relate his remarks to the amendment he had better resume his seat.

Mr. J. O'Leary

I am relating all of my remarks to the amendment. All of my remarks so far have been so related.

I believe that the Minister and the IDA are letting down the ordinary Irish man and woman who may want to set up an industry here and, if the Minister is serious about it, he will accept Deputy O'Malley's amendment.

Mr. Tunney

I do not propose to speak at any length except to say that, if for no other reason than that it contains an acknowledgment or recognition of our regard for what might be called the coming-of-age of the Irish entrepreneur and of the obligation on us to treat him in the same fashion as anybody else, the amendment is to be welcomed. It may be shown that we do. On the other hand, it would appear from the figures Deputy O'Malley has given that, in the past, the weight of financial assistance has gone towards—I do not like using the term “the non-Irish”—the outside company, a figure of £48 million assistance given to those deemed to be outside the country as against £14 million to undertakings at home. However, it is not the time or place to have any great discourse on that.

The Minister did accept that the spirit of the amendment was such that it was stretching out to acknowledge the Irish element in our industrial development. We should realise that in the past, because of our agricultural background and our lack of industrial tradition, it was necessary to have, indeed we welcomed and continue to welcome, outside influence and aid. But surely we must now be reaching the point, and I am saying this because I am mindful of the fact that there are rumours abroad—I am not saying I agree with them—that if an Irish concern goes to the IDA looking for money they practically have to prove beforehand they do not want it. It is like going to the bank manager for an overdraft. The same yardstick is not applied to companies from other countries. I am not saying that this is true. I am saying, and I am sure the Minister is aware of this that these things are being said.

I am not hoping that acceptance of Deputy O'Malley's amendment would exclude repetition of that but I am concerned that there should be an indication as far as Irish entrepreneurs are concerned that it is acknowledged they have, as it were, come of age and will, provided they have the proposition and indicate that jobs are being created, get a hearing and that a certain amount of the moneys allocated will be aimed at Irish industrialists. If our faith in our own industrialists should prove unfounded, then it will be quite easy to introduce appropriate amending legislation. Some months ago we had another IDA Bill before the House and if what Deputy O'Malley seeks to provide is not availed of then the law can be amended.

As far as the Treaty of Rome is concerned, I had thought the Minister would appear at least before the Opposition to be made of sterner stuff. I do not think the Minister need will before the Treaty of Rome because a case can be made, having regard to our special position, that that which is appropriate to the German, the French or the British industrialist is not necessarily appropriate in our case. In the matter of discrimination, so long as it appears we are not discriminating against the outsider one can introduce conditions which may appear discriminatory against the native industrialist. I am sure that can be circumvented so that the spirit of Deputy O'Malley's amendment can be honoured.

Those are the only two points I want to make. The time has come for us to acknowledge the position of the home industrialist. Instead of thinking in terms of bringing in industries from outside we should be assisting our own who are in urgent need of assistance. This could be done by acceptance of Deputy O'Malley's amendment. Where the Treaty of Rome is concerned, in our special circumstances and with the expertise the Minister has in his Department and the expertise he himself can contribute we could, I believe, circumvent the relevant inhibition in the Treaty of Rome.

Mr. T.J. Fitzpatrick

(Dublin Central): From the figures Deputy O'Malley has given there is a wide discrepancy in amount as between grants given to foreigners and grants given to Irish industrialists. I know it has been difficult for some years past to get Irish people to invest in Irish industry and looking at the industrial climate the Minister will have a difficult task on his hands where the small investor is concerned even with the acceptance of Deputy O'Malley's amendment. There is an air of uncertainty. There is a lack of return on capital. The problems facing Irish industry will continue for the next four or five years. There are small companies that could expand and could command markets abroad but there is a lack of cash flow and there is a non-availability of loans. Because of the scarcity of money and the cost of money, industrialists will not take up these grants. Even if they did take them up there is the problem of the cash flow, a problem they have to contend with every day of the week.

It is difficult to get money from the banks and, even if one does get it, it is very costly. These firms have to buy their raw materials c.o.d. and they have to sell on three to four months' credit. This reduces profitability. Unless something is done to solve these problems there is not much hope of small companies expanding. Those industries on the export market have some concession because they are exempt from income tax. We have reached the stage now where the companies selling on the home market are meeting the same competition as if they were selling on the export market. For the sake of retaining staffs and keeping factory wheels turning, British and American companies are exporting to the Irish market and they are subsidising their goods to keep their factories going. The Minister should have a look at the possibility of some concession from the point of view of taxation for those of our industrialists selling on the home market.

An Ceann Comhairle

The Deputy is going away from the amendment now.

Mr. T.J. Fitzpatrick

(Dublin Central): I agree, but it is certainly one of the problems confronting us from the point of view of expansion. The IDA should examine into applications. Large companies do not have a problem in formulating applications and giving proper projections. There are, however, people who do not have the same expertise in formulating applications and these are the people Deputy O'Malley would like to assist. We are not channelling resources into potential manufacturing units. What consideration would the IDA give to a group of four or five people who could establish a small factory in which they would be the actual work force? I doubt if we are channelling enough resources into small manufacturing units. If we are to continue in our present state, we will have to depend on the larger units. These large units will take up a bigger portion of our work force but at the same time we must encourage more of our people to go into the manufacturing industry. At present our people are hesitant to do so because they feel there is too much of a risk involved. The person with £50,000 or £100,000 at his disposal is hesitant to embark on any venture even if that venture is backed by an IDA grant. If there was some other system, such as interest free loans, such people might be encouraged to invest their money because they would not be running such a high risk.

It must be remembered that such people have the expertise, a very important factor. It will be difficult to encourage people to invest in manufacturing industries because at present they can get a good return, without any risk, on gilt-edged investments. These people are waiting for the end of the economic recession but in the meantime the country is suffering. I believe that the credit available at the banks is not being taken up. The Minister will not be able to tackle this problem alone. The Government will have to generate a climate of confidence. A number of manufacturers told me last week that their auditors advised them against reinvestment in their companies because of the wealth tax.

I am aware that the Government are considering proposals with regard to small industries and in this regard I hope such industries are encouraged to expand. While there has been criticism of the IDA they played their part in boosting our industrial development. It is hard for the IDA to be perfect and grants cannot be given to every project. If we are to stop the decline in employment, positive steps will have to be taken. The Minister must produce, without delay, a blueprint for industrial expansion.

An Ceann Comhairle

The Deputy is going far away from the amendment. He is dealing with the economy generally.

Mr. T.J. Fitzpatrick

(Dublin Central): The majority of manufacturers are operating at 70 to 80 per cent of capacity. They should be encouraged to improve their output, particularly on the export market. We should do everything to improve their situation even to the extent of subsidising their exports. If our exporters are not subsidised they will be swamped by competition from countries who have introduced such subsidies in order to keep their people in employment. It is better to subsidise exports and keep our people in employment than paying people on the dole. Unless we do something in regard to the small manufacturers we will find that when the recession ends there will be nobody to avail of the IDA grants.

Mr. Dowling

The first thing that strikes me about this amendment is that Irish citizens should not be at a disadvantage when they apply for IDA grants. There is money available for investment here if the proper facilities are made available to our own people. Irish industries, when they apply for assistance from the IDA, must produce records of trading over five years but a foreign industrialist can start from scratch. An industry with the names of five or six foreign directors on its letterhead will be given sympathetic consideration before an application from an industry with Irish directors. Are the IDA attracted by foreign directors or do they feel that foreigners are more efficient than Irish directors? A reexamination of the outlook of the IDA should take place.

According to figures quoted by Deputy O'Malley, the IDA has been milked by some big industrialists, but to a large extent they were foreigners. I am not against foreign industrialists coming here but we must remember that in most cases such industries are subsidiaries of companies operating in wealthy countries. As the pressure comes on the parent company it is more than likely the subsidiary will be the first to go. In such circumstances we are very vulnerable here. I think the IDA outlook is too rigid and should become more flexible.

Today I was dealing with the IDA in connection with a concern anxious to establish an industry here giving guaranteed employment to 56 people in a designated area, but they are having severe problems with the IDA. The result is that this concern are considering getting some of their commodities manufactured in Switzerland.

An Leas-Cheann Comhairle

The section deals with money.

Mr. Dowling

If this concern got what they are entitled to they would not be at a disadvantage with their competitors. I am afraid the IDA frown on such industries. Favourable consideration should be given to people who are prepared to establish industries here and who have got the necessary markets and the ability to supply them.

An Leas-Cheann Comhairle

The amendment deals with grants——

Mr. Dowling

I was speaking about Irish-controlled companies. If the IDA fears were well founded I could understand it, but this company who have the ability to supply markets are being offered a 35 per cent grant in a designated area while their competitors get the full grant. It is only when one is intimately involved in such a situation that one can see the injustice meted out to some small companies. We know there is a risk involved in any industry, but the IDA should not take up such an attitude in relation to small industries. In the international set-up, somebody in Germany, Switzerland or Japan, by a stroke of the pen, can wipe out the Irish subsidiary, maintaining full employment at the home base. Therefore, when an Irish concern is anxious to establish a factory they should be given full consideration by the IDA whose present approach is driving people here to examine alternatives——

An Leas-Cheann Comhairle

I do not see how this can arise on the amendment.

Mr. Dowling

They should get the same scale of grants as their competitors.

Mr. Daly

I can accept some of what the Minister said in relation to Irish companies not being refused funds for development but I cannot accept his announcement about EEC regulations.

Mr. Keating

They are not regulations. They are articles in the Treaty which have the force of law.

Mr. Daly

I am sure we could find our way around them. I want to draw the Minister's attention to subsidiaries here of international companies who have got themselves into difficulties in the last few years. They have had to close down because of decisions by the parent companies. Would the Minister direct the IDA to take some initiative, to take over these subsidiaries when they get into difficulties? I am suggesting that the IDA become more directly involved in the running of some of these companies under Irish management and manned by Irish workers. A case has been made by unions and others for workers' co-ops. I am suggesting that the IDA take the initiative and I am asking the Minister to request the IDA to get involved in the initiating of companies under Irish management, companies who could produce goods which now have to be imported. Somebody mentioned tags for cattle, ear-tags required by the Department of Agriculture and Fisheries in regard to testing. These have to be imported and I suggest the Minister might draw the attention of the IDA to the need to establish companies which would manufacture such commodities.

Mr. Callanan

I support the amendment. We all welcome foreign industries but in the long run companies established by Irish people are more committed to the country than foreign companies. What Deputy Daly has said merits attention—the IDA should get more involved in Irish industry, particularly in small private companies. Personal supervision in a company means a lot and foreign industries coming in, although they employ Irish workers, have not the same commitment to the country. There is more personal attention in small home-based industries and we should give every assistance to their formation, always knowing the risk involved.

Having spoken at length on the Second Stage of this Bill I do not intend detaining the House now but I support this amendment fully. We are not saying that foreigners should not be encouraged to set up here but we are saying that there should be more encouragement and incentive for Irish industry. Deputy Fitzpatrick referred to the question of subsidising the exports of Irish industry. Other countries have done this in relation to their industries and, indeed, some of these are guilty of dumping their exports here.

I am surprised and disappointed that during this pre-Christmas period there has not been more emphasis on the "Buy Irish" campaign. Has this campaign been dropped altogether? I have not heard it referred to in recent times. Our people should be patriotic enough to support Irish industry and to take into account the jobs of their fellow countrymen. While we welcome foreign industry Irish industry should be given the advantage in terms of support.

Mr. O'Malley

Notwithstanding the assurances given by the Minister and the assurances that the IDA give, it must be accepted that there is a widely held belief among Irish industrialists, whether justified or otherwise, that it is more difficult for an Irish industry to get assistance from the IDA than is the case in respect of foreigners. It is regrettable that this is the belief among our own industries because it deters people from applying for assistance.

Mr. Keating

Perhaps I might interrupt the Deputy to assure the House that if I get evidence of differentiation on the part of anyone against Irish industry I will have such differentiation dismissed. There is no such differentiation that I am aware of. I promise to dismiss any that is brought to my attention.

Mr. O'Malley

We accept that assurance from the Minister and from the IDA but, unfortunately, there exists this widespread belief in regard to foreigners being in an advantageous position vis-à-vis Irish industrialists in relation to getting assistance from the authority. One of the reasons for this belief is that immediately somebody starts talking to the IDA about an industry he is asked whether he has been engaged in this type of operation before, what were his figures in previous years and so on. Invariably the Irish promoter proposing to become engaged in any such industry has not been involved in such operation before and, consequently, is at a disadvantage because he cannot comply with a fundamental criterion of the IDA in the same way as can a foreign industrialist who, probably, has a similar factory in his own or some other country. The IDA should go out of their way not to apply the same criteria to Irish industrialists as they would apply to foreign industrialists.

Another difficulty with which Irish industrialists have to contend and which is not taken into account by the IDA is in relation to the relief of income tax on industrial export profits. This concession is of far more value to foreigners than to Irish persons. I say this because normally in an Irish export manufacturing industry the whole process is conducted in Ireland whereas in the case of the foreign industry this may not be the case because a substantial part of the manufacturing process may be carried out abroad and a partly-finished product exported to Ireland for completion and, consequently, for re-export. In that way it is possible for the subsidiary here of the foreign company to show a much higher degree of profit in Ireland than is possible in the case of the Irish manufacturer.

I referred to this point on Second Stage and it is relevant to this amendment in that the concession gives a considerable advantage to the foreign industrialist who is operating in the way I have outlined. There are a number of foreign industrialists who carry out the entire process in Ireland. I am not referring to those. In the case of the partly-finished product being sent here for completion, it is imported at an artificially low price, a price that would cause a foreign company to suffer a loss or at least to show no profit in their own domestic market. This price could be so bad that the difference in the two prices is not accounted for by the value that is added here so that there is a very large profit element in the re-export price from Ireland. Therefore, the profit is maximised in Ireland and the export tax relief is of much greater value to a company operating in this way than it is to an Irish company who may have only a small profit, or, as is common nowadays no profit. Alternatively they may show a profit on paper on the basis of the traditional method of accountancy but may not have a profit if the new form of inflation accounting which is now being recommended in Britain is applied.

I mention this as a further instance of the disadvantage in which an Irish industrialist finds himself and to show the necessity for the IDA to give Irish industrialists particular assistance. I agree with the Minister that it may not be appropriate to spell out in statute the obligations of the IDA in so far as this might create problems in regard to our EEC membership and that there are certain problems which make it difficult for the IDA to estimate percentages in advance in any year but if they were to approach the whole question of the encouragement of Irish industries on the lines that have been advocated today by five or six Members, including the Minister, all of whom were ad idem on what should be the approach, I would be happy with such assurance and would not seek to bind the authority by way of statute. Numerous Deputies have said that there is this widespread belief regarding the Irish industrialist being at a disadvantage in relation to assistance. However, I am sure that in the sense of the IDA receiving two precise applications, one from a foreign company and one from an Irish company, there would not be any discrimination in so far as the Irish company are concerned. But the IDA will have to bear in mind that it is difficult for the Irish industrialist to make an application which, from the authority's point of view, is as acceptable as an application from a foreign company who have been engaged in the industry concerned for many years.

On the basis that the IDA will take account of the views that have been expressed, I am prepared to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed: "That section 2, as amended, stand part of the Bill."

Mr. O'Malley

The last time the section was amended it was merely an amendment of the figures but this time the whole section is set out again. Will the Minister tell the House if there is any reason for that? In section 2 of the 1972 Act there was simply a substitution of figures but now the whole of the 1969 Act is set out again with certain additions.

Mr. Keating

There are two points here. First, we have the new category of guarantee, namely, the separation between guarantees and grants. Secondly, it is simply for the sake of drafting clarity rather than to set out a number of figures. There is no purpose other than clarity of drafting and a clear distinction between the grant category and the guarantee category.

Question put and agreed to.

SECTION 3.

Question proposed: "That section 3 stand part of the Bill."

Mr. O'Malley

I take it there was no limitation on the amount of guarantee that hitherto could have been given to an industrial undertaking——

Mr. Keating

That is correct.

Mr. O'Malley

——even though there was a limitation on the amount of grant that could be given? Will the Minister tell the House if the IDA gave an exceptionally large guarantee and, consequently, that it was found necessary to write in this new subsection?

Mr. Keating

No, that is not the case. It was thought desirable by the IDA for the absolute clearness and specificity of the guarantee that it be within a limit of the same kind as applied to grants.

Mr. J. O'Leary

Will the Minister call the House why the IDA were included from the list of semi-State organisations whose accounts are to be examined by a proposed Select Committee of the Dáil?

An Leas-Cheann Comhairle

That matter does not arise on this Bill.

Mr. J. O'Leary

I am sure the Minister would like to answer the question.

An Leas-Cheann Comhairle

When the motion comes before the House it will be appropriate to discuss that matter. It is not appropriate to discuss it on this Bill.

Mr. O'Malley

This section adds a subsection to section 37 of the 1969 Act. On looking at section 37 I see the immediately preceding subsection (4) refers to the topic we have been talking about in relation to amendment No. 1 today. It appears to take quite a different line to what is contained in amendment No. 1 and to have the opposite effect. It states that the reference to moneys in subsection (3) shall be taken as referring to the cost in the currency of the State of the actual moneys payable by the authority. The actual moneys payable by the authority would be those the authority are called on to pay on the day their guarantee is called up or when they are asked to honour that guarantee. The distinction is drawn in the subsection between moneys in Irish £s and sterling and moneys in some other currency. Under that subsection the IDA would appear to be in the difficulty that they will be called on to pay the higher figure if there is a depreciation in a non-sterling loan guarantee. Perhaps the Minister would say why section 37 (4) of the 1969 Act differs in this respect from the amendment we have just passed?

Mr. Keating

Although we may be referring back to matters already dealt with, I will try to help the Deputy. One relates to the actual amount of money to be repaid if there is default and if the guarantee is called in and the other relates to the keeping of a cumulative total of the aggregate amount lent. If some of the amounts of guarantee within that cumulative total—it is made up of a number of separate transactions—are in a currency other than the currency of the State they can, and would, fluctuate up and down every day. In terms of repayment that is not a great problem but in terms of not going through a maximum which is authorised by law it is a great problem. The legal advice I have received is that if by accidental fluctuation it went through the maximum then all the guarantees would come into question because the statutory limit was burst by the fluctuation of the currencies.

The amendment relates only to the keeping of an absolutely accurate tally of a known amount that will not fluctuate due to currency fluctuations and which therefore cannot be accidentally burst. Therefore, it cannot happen that all the guarantees will be accidentally invalidated due to currency fluctuations. They are two separate matters. The purpose of the amendment we are discussing is to absolutely ensure the validity and the legal standing of the guarantees given and, apparently, that can work only according to the mechanism introduced by this amendment.

Mr. O'Malley

Would the Minister tell the House the biggest guarantee given by the IDA under section 37?

Mr. Keating

It is of the order of £10 million but I cannot give the exact figure. I understand there have been no guarantees given in currency other than sterling. It is approximately £10 million and it is in sterling.

Mr. O'Malley

Will the Minister state if the consent of the Government was obtained as a matter of practice for that guarantee even though there was no statutory obligation to do so?

Mr. Keating

There was not then a statutory obligation but it was obtained as a matter of information and courtesy.

Question put and agreed to.

Section 4 agreed to.

Title agreed to.

Bill reported with amendment and passed.

An Leas-Cheann Comhairle

This Bill is certified a Money Bill in accordance with Article 22 of the Constitution.