The Minister did not take up my final point. Does he intend to take up these shares too?
National Stud Bill, 1976: Committee and Final Stages.
Section 1 agreed to.
SECTION 2.
Question proposed: "That section 2 stand part of the Bill."
At present only £1.7 million of the existing £2 million has been taken up, and what we visualise is that shares would be taken up in accordance with the programmed expansion of the National Stud as the occasion arises but, of course, not until then. However, there would be no hesitation in taking them up as soon as the need for the expansion of capital actually arises.
This point is related to my other amendment about borrowing powers. The Minister should indicate here whether he is prepared to take up shares and provide capital for the National Stud only for permanent investment purposes, in other words, lands and buildings, facilities and so on, or whether he will make money available through the share capital mechanism for the purchase of bloodstock and sires.
We certainly would for the purchase of bloodstock and sires. It would not be a question merely of increasing capital for fixed assets as distinct from bloodstock, which we regard as a fundamental ingredient of the National Stud.
Question put and agreed to.
SECTION 3.
I move amendment No. 1:
In page 2, line 21, to delete "£500,000" and substitute "£5,000,000".
This is a very simple amendment. I have already adverted to it in my speech on Second Reading. I suggested that, as the Minister is making changes, he should bring the situation in regard to borrowing powers more into line with modern practice. In other areas of the legislation he has updated the provisions in regard to the National Stud solely on the basis of bringing them into line with modern practice. He is not following that principle here.
On this I want also to make a point about the share capital. The National Stud should have a prestige stallion, and I would hope that very soon they will get round to having a really top-class, international, prestige, classic-type stallion. The amount of money involved these days in the purchase of such a sire is enormous. It can be £1 million or even £2 million. Providing that sort of money through share capital might not be the best way from his point of view. It might be better if he made that money available or if the directors of the National Stud could get that money through borrowing. If they are doing their business properly, they can finance the purchase of a top-class international sire on a four-year repayment basis. The modern practice is that a stallion of that quality repays his purchase price inside four years. I might as well admit here that the reason for that very often is that it is four years before anybody knows whether that stallion is going to be a success or not, and the approach of the modern studs is to have the stallion liquidate his purchase price over a four-year period.
Before he is found out.
Before he is found out. I am afraid that is the reality of the situation.
Tulyar, for instance.
Others, too. In that situation I would like to see the board of directors of the National Stud having the power to borrow £1 million or £2 million to buy such a stallion on the basis that they would regard the purchase of that stallion as a normal commercial transaction. The management of the stallion would be such that they would repay the borrowing in the four-year period as I have suggested. In that context I would be quite happy to see the Minister providing more share capital for general purposes but the purchase of top-class international sires might possibly be better done through borrowing.
We must also bear in mind—and I am sure Deputy Colley would agree with me in this from his experience— that, with the pressures on the Minister for Finance, if the board of directors of the National Stud come to the Minister and seek £1 million or £2 million for the purchase of a sire, he might have to tell them to take their place in the queue and wait until the following year or the year after, by which time the stallion might not be available. Therefore, it would be preferable from every point of view to have the board in a position, if a suitable sire comes on the market, to borrow the money on a straight-forward commercial basis to buy that horse. That is why I would like the Minister to consider increasing the borrowing powers to £5 million, so that the share capital and the borrowing powers would be in line, and I think that is in accordance with the best modern commercial practice. I am sure this is somewhere in the articles of association, that even though the board would have the statutory power to borrow up to £5 million, they would not be able to do so without the Minister's sanction, so he need not have the worry that the situation would get out of control; in other words he would still, on a particular occasion, have to sanction the borrowing the board wished to engage in.
I do not think it is desirable that the Dáil should give such extensive borrowing powers to any semi-State body. Having regard to the financial position of the stud and the price which might have to be paid for a prestige stallion, I am satisfied that the proposed capital increase will cover the additional cost which might be involved in such purchase. I do not believe we would be justified in asking for twice the amount, which, in fact, is Deputy Haughey's recommendation, that the capital should be increased to £5 million and that borrowing should be increased from £0.2 million to £5 million, which would be a very substantial increase on the existing borrowing requirement.
I am not saying that the Board has absolute wisdom in this field, but it is significant that the board itself has not sought any additional borrowing power. They are quite satisfied with the £0.2 million that they already have and that they have not even used. I do not think that they have used to the full the borrowing facilities which are available to them, and we are providing quite a significant increase. If the board were to be authorised to borrow up to £5 million, it might exercise that power but it would then have to meet very high interest charges on its borrowing. It must be a cause for some comment and a matter to be watched that the National Stud has not so far paid any dividend on the capital which it has received from the State. To receive capital interest-free is in itself a very generous contribution, particularly when interest rates are running as high as they are today. I accept the view expressed by Deputy Colley that the National Stud approaching the Minister for Finance looking for an increase in its capital might be asked to take its place in the queue but that happens to be the experience of all organisations and agencies.
Would it not be useful to tell them to go out and borrow the money if it is a straightforward commercial purchase?
Would that not make the stallion dearer?
It could make the stallion dearer because it would have to be paid for out of borrowed money and, therefore, the financial position of the National Stud would not in any way be relieved by such an enterprise. Supposing the particular judgment was unsuccessful, not due to any lack of expertise or dedication on their part but because of the laws of nature, then they could find themselves saddled with a very considerable debt which would not be generating any ability to repay. It is much better to keep it on a capital basis. Having regard to the very considerable expansion of capital and to the considerable increase in their borrowing powers, 150 per cent, we are going a long way to meeting the ordinary operating difficulties which could arise. If we were wrong in our assessment of the situation I am sure the Minister for Agriculture and Fisheries would not hesitate to seek the additional borrowing power, and interim arrangements could be made to facilitate the purchase of an animal.
I would think that the probability is—I am not here to express any firm view—that if a stallion costing a considerable amount were to stimulate the interest of the National Stud it might be better to have a syndicated purchase rather than an outright purchase by the National Stud. That may be a desirable thing and it certainly would spread the risk load. If there was to be a great success the profit would not come entirely to the National Stud; but this is the kind of thing that is likely to happen in relation to future purchases in this area, as it happens generally in the private sector. One must bear these things in mind. It would be undesirable that a very large sum of money should be borrowed in relation to the purchase of a particular stallion and as a consequence put the whole viability of the National Stud at risk. Surely it is better to spread the load. We are enabling the National Stud to expand their capital and expand their borrowing up to £500,000. That and other possibilities which are open to them should ensure that the National Stud will be able to make suitable acquisitions in future which will help to improve their own contribution to the Irish bloodstock industry and the reputation of that industry also.
This is the sort of situation that sometimes makes me despair of the legislative process of this House. The Minister knows perfectly well that what I am saying is unanswerable. There is no reason why he should not give himself this flexibility. The argument that he can come along later and increase it does not stand up. Why, if there is such a possibility, should we not legislate for it now? Why waste the time of this House with the whole gambit of legislation and all that it means just to increase a figure from £500,000 to £5 million or whatever we decide? I appeal to the Minister not to stick to £500,000 here because it is what is in the Bill. I am afraid that is what he is doing. He is inventing all sorts of unrealistic arguments just to defend that figure which is already in the Bill, simply because it is in the Bill.
The Minister for Finance, and the Minister for Agriculture and Fisheries, will have full control over the borrowing operations of the company and there is no doubt about that. The company will not be able to borrow a halfpenny without their consent. All I am asking the Minister to do is to give himself, and the Minister for Agriculture and Fisheries, the flexibility to enable the company to borrow if they decide it is desirable they should do so. I cannot understand why he does not accept this. It is as clear as daylight to anybody looking at the proposal of the Minister that the present position is that there is £200,000 borrowing and £2 million capital, that one is one-tenth of the other. When we come to drafting the Bill we increase the capital to £5 million. We stick by the old rule of thumb and have one-tenth of that for borrowing. In that case the £200,000 goes up to £500,000 and the £2 million goes up to £5 million. That is how this came into being in this Bill and no other way. The Minister cannot attempt to deny that.
If the Minister is a reasonable man at all he will accept that the right thing to do is to give the board the statutory power, the flexibility, to be able to borrow. There is no question of the company bankrupting itself because of borrowing. The Minister admits that sometimes the board will come to him looking for money and he would not be prepared to give it out of the Exchequer because the financial circumstances of the Exchequer would not permit it. Why in those circumstances should the Minister not be able to say to the board: this is a commercial proposition you are engaging in, you are buying this horse as a straight-forward commercial proposition and you should go and borrow the money at normal commercial rates and buy the horse; do not be asking the Exchequer for the money? Surely that is common sense.
The position with regard to the purchase of these top international sires is as I have outlined: it is an almost first rate situation. One can pay £1 million or £2 million for one of these horses and be almost certain that one will recoup that money over a four-year period. One can insure against fertility and all those things. The board of the National Stud in 99 cases out of a 100 could certainly go out with the Minister's blessing as a straight-forward commercial proposition and borrow £1 million or £2 million to get for themselves a prestige stallion. I cannot understand why the Minister will not agree to that.
I trust the Deputy would not disagree with the desirability that risk should be spread and such risk could be spread by syndication. If syndication is engaged in by the National Stud then borrowing of £5 million is unnecessary in the foreseeable future. Certainly, I see a need to increase their capital requirements and when we have a board, as we have in the National Stud, which does not seek any increase in the borrowing powers I must bear that in mind.
The Minister should put away his brief for a moment and apply his own common sense to this matter. If he thinks about this for a moment I am sure he will agree with Deputy Haughey. It makes sense.
No, I will not. It is wrong that we should give excess borrowing powers to State bodies if they do not need them or if we consider it is undesirable that they should have them. I do not think it is desirable that a State board with £5 million capital, if and when that is issued, should have a borrowing power henceforth, even subject to my control, of £5 million. Eventually, as the State is the sole shareholder, it is the State that would have to bear the loss arising. I know these things can be insured against but I do not think it would be appropriate that borrowing power for £5 million should be given to a concern with a capital potential of £5 million. I do not think it is necessary. If by keeping a restriction we incur a syndication and spread the risk, that is desirable.
The Minister should not have brought up this point of syndication because in fact it is an argument in my favour. The way in which the National Stud would syndicate a horse of this calibre would be that they would go out and buy the horse and then syndicate the horse to a lot of interested parties. There would be a question of borrowing the purchase price of the horse in the interim, from the time it is bought and the time they syndicate it and this is where this power of borrowing would come in and be needed. In bringing up the question of syndication the Minister is introducing an argument against himself. The only other way in which syndication could come into this is where the National Stud as a breeder would go out and take a share in somebody else's syndication. Perhaps, they would do that but in so far as they would be the syndicator this borrowing power would be absolutely essential and vital to them. Reason does not prevail.
With all due respect, we are being very reasonable. In accordance with known policy and prospects for the National Stud a borrowing requirement of £5 million is not anticipated and it is wrong that Parliament should issue a blank cheque.
It is not.
If there was no need to look at the situation and what is anticipated in the future we would not need to put any ceiling at all. We would allow every State body to have unfettered control. It is proper that needs as they arise should be explained to the House.
As far as the public capital programme is concerned, whether it is capital advanced or borrowing, there is risk involved, and one must look to what will be the competing demands on public capital for several years to come. We have gone a long way to increase the borrowing capabilities of the National Stud.
I will bear in mind what the Deputy says and discuss it with the board. I have no doubt the Minister for Agriculture and Fisheries, who will have responsibility in this area, subject to the approval of the Minister for Finance, will not hesitate to come forward with proposals if and when it becomes necessary to extend the powers. Frankly, I do not think that will be likely for a long time to come. They have resources of their own from which they can meet some of the cost.
One despairs of the whole point of parliamentary debate.
No, it all depends on the personnel involved.
Amendment, by leave, withdrawn.
Section 3 agreed to.
Section 4 agreed to.
SECTION 5.
Question proposed: "That section 5 stand part of the Bill."
When the Minister was dealing with this in replying to the Second Stage debate I understood him to say that this section was an up-to-date version of what was there already, and that the obligations at present on the National Stud in regard to the keeping of accounts were similar to those applying to other State companies, except that there were special provisions applicable to bloodstock in the 1953 Act. Did I understand him correctly?
Yes, the Deputy understood me correctly in referring to the fact that the 1953 Act had a provision in relation to the keeping of bloodstock accounts. We are repealing that——
That is the point I am coming to.
——in the Bill before us. I explained on Second Stage the difference between section 25 of the National Stud Act, 1945, and the provisions relating to accounts now. The new provision is in line with the provisions approved by the Comptroller and Auditor General.
In line with State companies generally?
Yes. What we are doing is taking out of the mosaic the old formula and slipping in the new piece which uses the wording of a modern Act in relation to the furnishing of accounts.
Could the Minister give any indication of the nature of the 1953 Act requirements which are now being repealed in so far as they related to accounts?
Section 25 (2) of the 1945 Act provides that
The balance sheet and profit and loss account to be furnished as aforesaid shall be drawn up in such manner as the Minister for Agriculture, after consultation with the Minister for Finance, may direct...
and the new Bill provides that
The company shall keep, in such form as may be approved by the Minister with the consent of the Minister for Finance, all proper and usual accounts of all moneys received or expended by it...
The company are not obliged by the new section, as by section 25 of the 1945 Act, to submit their accounts within 90 days after the end of each accounting year. It has been found in practice that a number of State bodies had real difficulties in furnishing accounts within 90 days after the end of the accounting year. It has been breached on a number of occasions. The statutory obligations have not been observed for what the Comptroller and Auditor General regards as good and sufficient reasons.
The new section also makes for more flexibility. The company may be obliged to keep such accounts as the Minister requires.
I want to ask the Minister to keep in mind what I said about the annual report. Subsection (4) reads:
The Company shall supply the Minister with such information regarding the performance of its functions as he may from time to time require.
The board of the National Stud have a very good opportunity here of performing a very important service for the breeders and the industry generally. I am disappointed to notice that the report and accounts for the year ended 31st December, 1971, gave more information than the report and accounts for the year ended 31st December, 1974. That is only a minor matter. I have already explained to the Minister that I do not want the National Stud to enter the status-seeking glossy report area which other State-sponsored bodies enter into from time to time. I am satisfied they will not do that.
I would like to see the performance of the seven stallions given in the report so that breeders could see exactly the calibre of the different sires, their achievements, their fertility rates, and so on. In addition, at very little extra cost the stud could supply an annual yearbook for the industry and breeders giving important information.
I agree we should have full information. The new provision will enable the Minister to call for fuller information. The old provision related to the balance sheet and profit and loss accounts and a report of the proceedings during a particular accounting year. The new provision will enable the Minister to specify additional information, including information relating to bloodstock accounts.
I would also remind the House that the National Stud is one of the State agencies which will be brought within the umbrella of the new Oireachtas Committee on semi-State bodies. If the Minister does not produce adequate information, the members of the committee, with their curiosity, will extract more information. I am not suggesting for one moment that the Minister should be lackadaisical in obtaining adequate information. I can sympathise with the view expressed by Deputy Haughey. I am sure the board will bear it in mind in relation to their annual statements in the future.
Question put and agreed to.
Section 6 agreed to.
SECTION 7.
I move amendment No. 2:
In page 3, line 55 to delete "five" and substitute "nine".
This is a very simple amendment. It relates to a matter I mentioned on the Second Reading debate. I raised the question of the size of the board and I do not think the Minister, in replying to the debate, dealt in any way persuasively with my suggestion. This is an important board. It is one which will have to take important policy decisions. I have already said that in my view—I was glad to hear that the Minister re-echoed my view —the present manager of the National Stud is a man of excellent qualities. I do not believe there is any way the board could get a better manager. However, management is one section and the board of directors have a different type of function. I would like to see the directors of the National Stud fully reflecting in their membership the different interests in the bloodstock breeding industry, the small breeders, the large scale stud breeder and right across the board. I do not believe the board can do this with a membership of five.
I fully agree with the Minister that the smaller you can keep a committee or board the better, consistent with the objective which it is intended to carry out. In this case I would like to see a bigger board from two points of view. First of all, I would like to see it as fully representative as possible of all the different interests involved. I would like to see it representative of all the different levels of breeders, racing interests and so on. Seven, eight or nine people would be necessary from that point of view. I also believe, in regard to some of the policy decisions the board will have to take, a wider spread of knowledge is essential. This can only be got from a larger board.
I can see a situation arising where the board would want to buy a particular type horse for a particular purpose. It might be a prestige stallion, a classic type of stallion, a miler or even a national hunt type sire. The way that normally proceeds is that the manager makes a report to the board on what the situation is. The board then have to come to a very difficult policy decision as to whether or not to buy that horse, whether it is suitable for their purposes, whether it has the quality, stamina, courage, whether the different lines he represents are the type the stud want to get into Irish bloodstock. All those considerations have to be taken into account. It is important to have a board of right general knowledge and experience able to take such a decision. I do not believe there is anything to be lost by having a board of nine members. I prefer seven to five. It is unduly restrictive for the articles of association to restrict the number of directors to five. I again reiterate that I fully agree with the Minister that bigger is not necessarily better in this particular context.
Small is beautiful.
Perhaps, but there are considerations involved here which make it desirable to have wider representation on the board.
I wonder what the Deputy would feel if I said I have no hard and fast approach to this thing but I would like to discuss the matter with the Minister for Agriculture and Fisheries? If he is of a mind that the board should be larger and, as he will have prime responsibility in this area in the future, I will introduce an amendment in the Seanad if that is agreeable.
The Minister slays me with reasonableness.
It is my nature.
Amendment, by leave, withdrawn.
Question proposed: "That section 7 stand part of the Bill."
The Minister spoke earlier, in relation to the subject matter of section 7, of the National Stud being in limbo. Whatever view one may take of the situation that has obtained in relation to the National Stud since 1969 the real question which arises is the position of the National Stud since the Government announced their intention of transferring responsibility for it from the Minister for Finance to the Minister for Agriculture and Fisheries. What precisely is being done? The Minister told us that in effect under this section the Minister for Agriculture and Fisheries was being substituted for the Minister for Finance in some cases and in others for the Minister for the Public Service.
He spoke a few times about a purely administrative change. He said in a somewhat complaining way that an administrative change had been made in the past without the sanction of the House. I would like to know precisely what is supposed to be happening under this section that would have the effect the Minister spoke about, that is to ensure that the next Bill of this nature is brought in by the Minister for Agriculture and Fisheries and not by the Minister for Finance? What provision of section 7 will bring that about or will it be an administrative change? What will determine it?
I will explain the difference between section 13 and section 7 of the Bill. Subsection (1) and subsection (2) (a), (b) and (f) are identical with the original Bill. Paragraph (c) is a change in that it is provided that the appointments and removal will be made by the Minister for Agriculture and Fisheries after consultation with the Minister for Finance whereas the original one provided that persons would be appointed by the Minister for Finance after consultation with the Minister for Agriculture and Fisheries. That is the only difference. The initiating Minister will be the Minister for Agriculture and Fisheries in consultation with the Minister for Finance. Subsection (2) (e) is similar. The Minister for Agriculture and Fisheries is the initiating Minister and the Minister for Finance is the Minister who is consulted.
Subsection (d) introduces the issue of remuneration and determination by the Minister for Agriculture and Fisheries with the approval of the Minister for the Public Service. That is a new subsection entirely. It can be seen here that we are putting the initiative in this area on the Minister for Agriculture and Fisheries whereas heretofore, strangely enough, it can be said, it lay on the Minister for Finance. Although the original Act of 1945 vested the National Stud in the Minister for Agriculture and Fisheries the appointment of people to the board was left to the responsibility of the Minister for Finance. We had this limbo, to use Deputy Haughey's words, this confusion of responsibilities. This is now an anachronism. The practice has been to concentrate initiative in areas of responsibility on the Minister who had primary concern for the board in question. That is what we are doing here.
The Minister for Agriculture and Fisheries tends to be a person better qualified to select people who can make a more significant contribution to the National Stud than the Minister for Finance. The Minister for Finance may be an expert on bloodstock, music, fishing or on a multitude of different activities but I think it is better to allow responsibility to remain with the person who has statutory responsibility and who has an obligation to the Dáil to defend the choice that is made. That is what we are doing here.
Is the Minister saying that because the section provides that the Minister for Agriculture and Fisheries will be the Minister who nominates members of the board or the auditor that as a consequence it will be the Minister for Agriculture and Fisheries who will be responsible for initiating legislation in this House in relation to the National Stud.
Yes.
Does the Ministers and Secretaries Act have no relevance in this matter?
The Ministers and Secretaries Act has relevance to all ministerial responsibilities but the House has conferred already from the previous Act primary responsibility in this area to the Minister for Agriculture and Fisheries. The selection of directors of a company is not a matter which the Ministers and Secretaries Act vests in the Minister for Finance. He has financial management. I cannot now refer to the text and verse of the Ministers and Secretaries Act but, as the Deputy will know from his own experience, the practice has been to leave initiation of these matters with the Minister who has primary responsibility in the area of the company in question after consultation with the Minister for Finance who, no doubt, injects his financial responsibility at that point. It is more a question of switching the emphasis rather than the decision-making power. I accept that consultation does not require consent but, in practice, Ministers do not tend to appoint people in the absence of agreement on the part of another Minister.
May we take it that the Minister is not absolutely certain that a subsequent Bill of this nature will be initiated by the Minister for Agriculture and Fisheries?
I think the Deputy may take it that it will be. However, I will look into that matter. In any case, the initiation of any Bill lies with the Government of the day.
I think there is a little more to it than that. There is the question of statutory responsibility.
Yes, it is a combination of both. I will look at the points the Deputy has raised.
Question put and agreed to.
Section 8 and 9 agreed to.
Title agreed to.
Bill received for final consideration and passed.