Dáil Éireann debate -
Tuesday, 29 Jun 1982

Vol. 337 No. 1

Sugar Manufacture (Amendment) Bill, 1982: Second Stage.

Minister for Agriculture (Mr. Lenihan)

I move: "That the Bill be now read a Second Time."

The main purpose of the Bill is to raise the limit imposed by existing legislation on the authorised share capital of the Sugar Company. At present, that limit stands at £10 million, a figure set by the Oireachtas in 1973. The Bill seeks to raise it to £75 million and to make a corresponding increase in the statutory limit on the aggregate of Exchequer advances to the company and of State guarantees for its borrowings. It also seeks to enable the Minister for Finance to acquire the whole of the company's share capital should that appear desirable.

In discussing the affairs of the Sugar Company I believe that the House would do well to keep a number of considerations of a general nature in mind. The first of these is that the company has been in existence now for very nearly half a century. In that time it has demonstrated a capacity for innovation and adjustment and a sense of vocation that has helped to change the face of rural Ireland, and that has contributed greatly to the establishment of long-term confidence in the agricultural sector.

A second is that the company is a major employer. Apart from the 3,000 or so employed directly it also provides employment in cultivation and harvesting on the farm, in the provision of fertilisers, seed and machinery and in road and rail haulage.

A third consideration is that over those 50 years the number of occasions on which a loss has had to be reported are few in spite of periods when the economic climate was far from encouraging.

With so much standing to its credit one might reasonably ask why it is that the company has run into difficulties over the past two or three years. To find an answer, at least in outline, Deputies need only turn to the report of the Joint Committee on State-Sponsored Bodies, completed just 18 months ago. This report is a model of detailed and far-sighted analysis. It was laid before both Houses of the Oireachtas and the Seanad debated it in March of last year. I mention it at this stage for two reasons. Its contents are an excellent introduction to the problems faced by the Sugar Company and the initiative taken by the committee is a starting-point for the process culminating in the Bill under discussion.

Deputies will recall that the committee began its examination of the Sugar Company at a time when the company faced a series of difficult and interrelated problems, including a substantial anticipated loss for the year ending September 1980. In its report the committee drew attention to the company's capital investment and modernisation programme, which had involved an expenditure of £30 million in the years 1975 to 1979, and then to the further three-year programme to cost £40 million which was under way. The committee went on to point out that this programme was financed almost entirely by loans from financial institutions. The company had indicated that the investment was essential to ensure the survival of the sugar industry since it would replace obsolete machinery and increase production efficiency. The report drew out very clearly the implications that this situation had for the financial structure of the company. It stated unequivocally that large recurrent interest charges were constituting a serious drain on the company's resources.

The Committee went on to observe that the company's debt/equity ratio exceeded commercial norms and that interest charges had become a very heavy burden on the company's operating profit. They noted that a large company in the private sector would already have sought to raise additional capital to correct matters. They further noted, and expressly supported, the view advanced by the company itself that an injection of £25 million in equity capital was then needed as a first step. Finally, they accepted that, over the next few years, there would be further calls on Exchequer resources to support a prudent and stable capital structure for the company.

The Committee did not attribute the company's difficulties solely to its financial structure and its investment programme. Among the causes of the change in the company's fortunes they identified unfavourable cost price developments, high interest rates and depressed market conditions. Thus, while they recognised that Government action alone would not be sufficient to help the company through its present difficulties they, nevertheless, considered the debt/equity imbalance to be the main item susceptible of improvement by such action.

The committee's report was, as I have said, considered by the Seanad early in 1981 and led to wide-ranging and constructive debate. In the course of this contribution, the Tánaiste, who was then Minister for Agriculture, stated that the report was forming the basis of an examination of the company's affairs within his Department. He also indicated that he was seeking the views of the company as to how it could be restored to full viability as rapidly as possible.

The company responded in May 1981, stressing the need for new capital and citing three main reasons. These were: firstly, the need to deal with the deterioration in its financial base mainly due to losses on the food operations and necessary investment required in the sugar factories; secondly, the need to continue its modernisation programme, and thirdly, the need to bring its debt/equity ratio into line with commercial norms. The company then asked that its equity capital be brought up to the level of £75 million.

The company's approach fell to be considered by the Coalition Government in July of last year. That Government, quite rightly in my view, decided in principle to make new capital available to the company, but reserved a decision on the amount, manner and timing of the capital injection until they obtained the results of an examination by independent consultants of the company's financial affairs. This course had the merit of reassuring the company's creditors on the Government's intentions, while avoiding a hasty and possibly ill-judged commitment of public money made without an independent and detailed assessment of the financial position.

The consultants' report was submitted to my Department in late March of this year and the Government now believe that they are in possession of the information necessary to enable them to make a rational and considered response to the company's needs.

The Government therefore propose to make the sum of £30 million available to the company in 1982. The Government anticipate that the need for further capital for the company may arise over the next three or four years. They are therefore proposing enabling statutory authority, in line with the usual practice for Central Fund issues of this kind.

The allocation of new capital to the company will of course be subject to certain conditions. The main one will be the submission by the company of a clear and specific programme for the rationalisation of its food-processing activities and of the beet-growing and sugar industry. The programme is to be furnished rapidly. If it is with my Department soon, and is satisfactory, it will mean that the Company will have new funding available to it in the autumn.

In relation to beet and sugar it is disappointing that in practically none of the past years has the company been able to obtain sufficient beet to fill even the A quota of 182,000 tonnes allocated to Ireland by the EEC. This quota was secured in Brussels only with considerable difficulty and it will not be long until the quota arrangements are up for discussion again. If we do not fill the quota allocated to us it will be more difficult to hold on to what we have. This places an onus of responsibility on farmers. If they do not grow sufficient beet to enable the company's production targets to be achieved, then the future of the company will be threatened. I would regard farmers as partners of the Sugar Company when it comes to ensuring the survival of the sugar company.

What is true of the company in general is, of course, true of the Tuam factory in particular. In deciding that this factory should remain open the Government are affording an opportunity to all concerned to ensure that the necessary efforts are made to guarantee its future.

In relation to food processing, it has to be admitted that Erin Foods is largely at the root of the company's inability to make consistent profits with which to fund re-investment. The joint committee noted that throughput during the 1970s remained static and that the contribution of the food sector to group turnover has been falling. Problems in this area include the small size of the home market as well as the squeezing of profit margins and the intensity of competition in the export market. The company, therefore, must make the best use of the skills and judgment available to it in developing a strategy suitable to the scale of its operations in order to turn the food activities around.

On a number of occasions recently I have discussed with the chairman the nature of the problems which must be tackled and the broad manner in which this might be done. We have also discussed the progress which has been made to date in this direction.

Before going on to deal with the contents of the Bill, I would like to draw attention to the company's losses over the last few years. In 1980 they amounted to £11.2 million, in 1981 to £12 million and they are expected to be of the same order this year.

As regards the Bill itself, section 2 deals with the amount of the share capital and section 4 deals with advances and State guarantees. The feature which will strike Deputies immediately is the figure of £75 million. The fact that such a figure is provided for does not, however, mean that the Government intend automatically to furnish new capital to the full amount of £75 million being set, or to do so in an uncritical way. My Department, together with the Department of Finance, will be monitoring the company's affairs closely. As I have indicated, the amount to be provided in 1982 will be limited to £30 million and that will be subject to certain conditions.

Deputy Dukes raised this particular issue last week during the debate on the Estimate for Agriculture. He mentioned that this was a matter of concern to him. I can assure him that I share that concern. Before I recommend to the Government the issue of any funds to CSET — funds which in any case are designed to broaden the company's equity base — I will have to be thoroughly satisfied that the company are putting themselves in the best possible position to take advantage of them.

Section 3 of the Bill calls for specific comment on two grounds. First, it is, given the company's overall projected capital structure, in some ways a change of technical nature. Secondly, it has a bearing on a point of some interest which the joint committee made. I will take this point first.

The joint committee raised the question of whether the ownership basis of the company might not be broadened. As it happens, there is in existence a volume of preferential share capital amounting to £500,000 which was taken up by the general public in 1934. Its existence points to a feature which seems to have been lost sight of in recent years. This is State involvement without 100 per cent State ownership. It is open to the company to seek some additional capital by means of further issues to the general public. The joint committee spoke of possible farmer or staff participation. If the company were to feel that this afforded a reasonable possibility of funding their activities, I do not think it would encounter major opposition.

I mention this because, taken out of its context, section 3 of the Bill might give the contrary impression. In the original legislation of 1933 a volume of £1.5 million out of a total authorised capital of £2 million was reserved for shareholders other than the Minister for Finance. In spite of subsequent increases in the authorised share capital, that £1.5 million has remained as an amount of shares which the Minister for Finance is precluded from taking up. As the company's capital base is now to be expanded significantly, the amount of this reserved class of capital has lost its original relevance, and the time has come to abolish it. However, its abolition does not affect the practical position relating to issues to the general public in any significant way. The provision in the Bill does not oblige the Minister to take up shares at present held by the public.

The Bill before the House has a simple enough purpose. It is designed to enable the State to carry out its duties as a share-holder in the company. It enables it to correct the situation of under-capitalisation which has been forced upon the company for a variety of reasons. The State is now, as it has been in the past, a willing shareholder in the company. I have no hesitation in commending the Bill to the House.

Mr. Dukes

This side of the House welcomes the Bill for a number of reasons, not the least of which is that we appreciate the situation the Sugar Company are in, a very difficult one. We have, as I indicated last Friday, a particular concern that the Sugar Company can continue to carry out their activities in the interests of the workers in the company, the farmers who grow sugar beet and vegetables for the company, the wider general interest of having a major sugar industry and, if this can be brought about, an expanded food industry in the country. I also welcome the fact that we have this Bill before the House because it affords us an opportunity to examine some issues which need examination and to which I ask the Minister to direct his attention in carrying out what he proposed to do under the Bill.

I make the point, which was adverted to by the Minister, that the previous Government were committed to making a substantial injection of capital into the Sugar Company largely for the same reasons that the Minister has outlined. We made the decision in principle to inject a substantial sum into the company because we believed the case put forward by the company, which has been repeated by the Minister this evening, that the company's capital base must be expanded in order to allow them to continue in operation and in order to provide for the possibility that we could get the kind of expansion in the overall operations of the company we would all like to see.

In our budget proposals last January, looking at the semi-State sector in general, we provided £90 million for allocation one way or another to semi-State companies, a number of whom had put forward a case for extra State funding. The demands made by the companies in question amounted to a great deal more than that. We believed, given the constraints of the time and the undoubted merits of many of the requests made by the companies, that a figure of £90 million was required in order to provide a reasonable response to the situation which had emerged.

I regret to say that the Fianna Fáil Government reduced this figure to £30 million for the full year. That gives rise to a question. If the Minister has his way will the Sugar Company use up all that available capital this year? Does that mean that no other funding will be available for other State companies? I do not want in any way to give rise to any divisive argument between State companies, all of whom have their own needs and all of whom must inevitably compete with one another for State capital.

This Bill and the Minister's presentation of it illustrate very clearly the unreflecting way in which the Government went about chopping off that allocation, reducing it by two-thirds and now they find themselves in the position where in one year for one company they must use all their allocation which apparently they believed they could allocate to all the State companies for this year. I do not make that point in any spirit of creating division between State companies nor do I make it in any way to criticise the Minister's provision for the Sugar Company for this year. There is a more general point there which the Government would do well to reconsider and which they need to explain to the general public very quickly because there are a number of other companies who have valid claims on the public purse.

The Minister pointed out that in May last year the company put forward a corporate plan setting out their views on the proper course of development for them over the next few years. The company indicated a need for an extra capital injection of £75 million over three years, £44 million in the first year, roughly £18 million in the second year and some £13 million in the third year. That corporate plan was drawn up by the company with three substantial objectives: first, to correct the financial base of the company; second, to allow the company to continue with a significant development of capital investment in order to allow them to meet the demands on their processing ability in the foreseeable future; third, to correct the company's debt to equity ratio. Nobody looking through the company's report could disagree that these are the objectives to which we must address ourselves. The figures contained in that report show the urgency and gravity of the situation.

The report for the year ended 30 September 1981 shows a total loss attributable to CSET of almost £12.1 million. This loss arises after an operating profit of £379,000, offset to a very large extent by £9.9 million of interest payable during the year. A second feature is a total of £66 million in overdrafts and advances outstanding on 30 September. To cap it all, shareholders' funds actually constitute a deficit of almost £3.5 million in the balance sheet. When one takes all those factors together one can see that the company find themselves in a very difficult position, to which the chairman referred in his report. Under the heading "Capital Requirements" the chairman stated:

Since 1976 this Company has spent over IR£40 million modernising its factories, reducing their oil dependence and increasing their throughput. Our current plans provide for a further IR£50 million of capital investment in the immediate years ahead. This inevitably puts a heavy financial strain on the Company.

The IR£40 million came from our own resources, or from borrowing which has had to be serviced at historically high interest rates. That investment has not been supported by grants as would have been the case in the private sector. Our borrowings — and the resultant cost factors indicated in the accounts — are reflections of an equity base totally inadequate to the scale of our operations.

That is the problem which the company brought to the then Government in May last year. The scale of the problem, illustrated by the figures I have quoted, certainly takes one aback. It is compounded by the historically high interest rates and if we are to proceed on the basis set out in the Bill and if the company proceed on the lines set out in the corporate plan, there is still no absolute guarantee that we can make a fundamental difference which will prevent a recurrence of this problem in the coming years. It is evident from the accounts that this company, as well as all other manufacturing enterprises and farms, are being very severely hit by a combination of internal cost factors and very high level of interest rates.

I would ask the Minister and his colleagues to consider that this is an acute example of what is happening to companies throughout the country and I would impress on them the need to adopt the kind of overall policies which will allow us to get to the root of these problems. I said last Friday that the Taoiseach and the Tánaiste appear to have got this message in recent days and I hope for all our sakes and for the sake of the Sugar Company that they will take seriously the words they have been uttering and act accordingly.

We agreed with the company that there was a need for a substantial injection of capital and my feeling was that without some further analysis of the programme put forward by the company and their operations it would be unwise to go ahead on the basis of the information we had and make an extra capital injection. For that reason I recommended to the Government that we should commission an independent study of the company's operations in order to assist us in identifying the level of capital injection required before making a decision on the specific amount to be allocated to the company. That consultants' report was commissioned and set in motion.

On 10 June Deputy Molony and I put down a number of questions to the Minister concerning this company and the consultants' report. I put down three questions, the first of which asked if the Minister had received the report and if he intended to publish it. The second question concerned the plans the Minister had for providing extra capital for the company and the third related to the conditions he intended to attach to the granting of extra capital. Deputy Molony had a specific question related to the provision of £5 million for special development of the sugar factory in Thurles in accordance with the commitment given prior to the general election last February. The Minister answered the four questions together, as was his right, and said that he had received the consultants' report and hoped to introduce legislation shortly to make provision for extra capital for the company. He said he was not yet in a position to indicate the conditions to be attached to such capital. He went on to say, "As the report relates to a company engaged in competitive trading, it is not my intention to have it published". I can see the point the Minister might have wished to make but it is in common parlance a "po-faced" answer. If the Minister and the company persisted in being so sensitive about these matters why would we have had the publication of the report of the Joint Committee on State-Sponsored Bodies to which the Minister has referred? The committee examined in detail the operations of the company and gave many of us more than food for thought and expanded our understanding of the problems faced by the company and of what is necessary to deal with those problems. The same considerations apply to this consultants' report, particularly since the Minister is now telling us that on the basis of the report, taken in conjunction with the company's own proposals of May last year, he now proposes to allocate £30 million this year to the company, with the possibility of a further £35 million being allocated in future years.

I can understand that the Minister is not in a position to say now what specific plans he would have for the remainder of the overall amount which he proposes to allocate. I again ask the Minister if he would give more details of what he has in mind when he says that he is attaching conditions to the allocation of the new capital. He says that the main condition would be the submission by the company of a clear and specific programme for the rationalisation of its food processing activities and of the beet growing and sugar industries. I am not quite clear what exactly the Minister means by this. Has he had a programme which enables him to allocate £30 million, or is he allocating £30 million in the expectation that he will be given a programme of that kind? This is not very clear from his speech. In asking for more details on this, I am not carping at the company, or in any way arguing about the need for extra capital for them, but we must all be sure that the programme will get general acceptance. The company are obliged to run their affairs to the best of their ability, in line with their own view of how they see this future development. However, we are talking about an allocation of capital by the State, about an industry which employs, as the Minister says, over 3,000 people, about an industry which is the outlet for the products of thousands of our farmers, which provides a great deal of haulage business, which is a user of all kinds of raw materials, fertilisers and so on. This is an operation which reaches right across the country into many different sectors. This House is entitled to know, before we vote extra money, what precisely is being done with the money, so that we can all be sure that the programme is one to which we can give our support, to which beet growers, sugar factory workers and workers in Erin Foods can give their undivided support and commit their efforts to making the programme work. It would be of assistance generally to know what that programme is.

There is another aspect which we should look at in considering this. As everybody here knows, a number of allegations about the way some of these operations have been run have appeared in recent days and have followed on the recent court case of the company. I have no wish to rake over matters which would be painful for a number of people, but again there is a duty on us to ensure that a company in the State sector to which it is now proposed to give £30 million is being operated, in so far as it is possible, according to the best management practices. It appears from the allegations and from the evidence given in the recent trial that, to say the least, there is a question mark over some of the internal accounting procedures of the company. We have their statements in court and subsequent allegations to the effect that various ploys were used to get around their internal accounting system.

It is important that the Minister should give this some attention and tell us this evening what he has in mind to rectify the situation. The question inevitably arises, what is wrong with the internal accounting system of the company that it can apparently be circumvented with such relative ease and over such a long period? What is being done to correct this situation, to avoid its recurrence, to improve the security of the company's internal accounting system? It appears from what we have seen that it is not watertight by any means and that leakages from it are possible. The list of difficulties which emerges from these various sources is quite considerable. We have examples of double and, indeed, multiple invoicing of products, false labelling of products, false orders, fictitious debits and credits in accounts, the entry of false documentation into the internal accounting system of the company — all of which went on, apparently, for some time without being detected.

If these things can happen in this company, we need, first, to ask what is being done to rectify this, to ensure that it does not happen again. Another question arises of what is being done to check that this cannot happen in other State companies. These are very important questions which need to be examined very closely. Now is the appropriate time to examine them, when the Minister is proposing to allocate a very substantial and sorely needed sum to the company. I and my colleagues on this side of the House are very much in favour of improving the capital structure of the company. There is no question about that. However, before we proceed along the lines indicated by the Minister, we want to be clear in our minds on what exactly is being done with the funds being allocated. We also want to be clear on what is being done within that company to prevent the recurrence of abuses which have emerged in the recent past.

One or two other points were raised by the Minister on which I would like more information. The Minister made the point that in practically none of the past years had the company been able to obtain sufficient beet to fill even the A quota of 182,000 tonnes allocated to Ireland by the EEC. This is something which concerns all of us. We are all anxious to ensure, particularly in today's difficult times, that we continue to have the maximum possible outlet for farm production of what is, in spite of the difficulties we have seen in the past few years, a reasonably remunerative crop for farmers. We are concerned to ensure that that situation continues and that, in so far as it is possible, that outlet for farmers is expanded. The Minister has quite rightly pointed out that the level of our quota will come up again for discussion. Procedures are used for fixing these quotas —"procedures" is probably too fancy a term with which to dignify what happens; a great deal of haggling goes on. Inevitably, past performances is one of the main factors taken into account. That was the case before our EEC entry and it has been the same since, whenever sugar quotas have been discussed.

I join with the Minister in emphasising that as far as we can we should try to reach the maximum level of sugar beet production allowed by the quota arrangements. The Minister said that this places an onus of responsibility on farmers. I agree, but equally it places an onus on other people, particularly the Government. I have said that we can regard the production of sugar beet as a reasonably remunerative enterprise compared with other farming enterprises, but it is just as susceptible, possibly more so, as many other farming enterprises to the kind of difficulties farmers have been having. So, if there is an onus on farmers to produce sugar beet up to the level which would enable us to maintain our present sugar quota and to bring the throughput in the sugar factories up to that level, equally there is an onus on the Government to produce the kind of economic conditions that will allow farmers to provide the input necessary to ensure that we will get an expansion in sugar beet production so that in total production we will come up to the target level we have set ourselves.

The provision of such economic conditions is largely a matter of making sure that firm action will be taken to reduce specifically the rate of inflation in farm costs and firm action by the Government to make capital available at something less than the present impossible rate of interest. A wide range of action is open to the Government and I hope the Government will show some commitment to taking such action in the near future. Otherwise the ambition to fill our sugar quota and to get the company on a sound footing will be difficult to realise. I ask the Minister to bear in mind that if there is an onus on farmers to produce sugar beet at a level necessary to bring us up to our sugar quota, there is equally an onus on the Government to bring about conditions in which farmers can do that profitably. During the course of his speech the Minister said:

In relation to food processing, it has to be admitted that Erin Foods is largely at the root of the company's inability to make consistent profits with which to fund re-investment.

I am not sure if we should read that in the wider context of the company's overall operations or in the narrower context of Erin Foods. Looking at the accounts, we can see that the main problem the company have encountered is the high level of borrowing at which they have been forced to work. It is clear that the sugar side has been one of the reasons for that high level of borrowing. It is not clear to me that Erin Foods can be taken to have been largely at the root of that situation, and I ask the Minister to elaborate on that. It is important that we look at it because one of the ambitions we must have in relation to the future development of the CSET group must be the expansion of the Erin Foods-type operation. We have a particular problem in relation to our sugar quota, and although we would want to expand that to the maximum level possible, it is clear that beyond the present level there is some limitation on how far we can go, even if we had a rapid expansion in the total acreage of sugar beet.

Even if we are looking for expansion in the total level of the company's operations, there must be heavy reliance on the Erin Foods type operation. Other sectors of the company's activities could contribute, but there must be heavy reliance on sectors like Erin Foods. Taking the kind of food market we have and food imports in competition with what we produce here, there must be a great deal of scope for expansion of food processing on the lines CSET have been involved in, and I ask the Minister to consider that and to give some details of the plans he has in mind for such operations.

It is interesting to compare what the Minister and CSET have said about that with what the IDA said recently in their programme of strategy for development in the food industry. If we could build the IDA approach into the CSET operations there might be something beneficial for the future development of the company.

The Minister referred to section 3 of the Bill and stressed that the section as it stands does not affect the practical position relating to the general share capital issues to the public. I thank the Minister for that reflection and I hope that in the future we will get to the point when the share capital issues by the group will be a practical proposition for the public. If that had been tried in recent years I am not convinced there would have been an enormous lot of capital forthcoming. The Minister's point is a fair one in so far as the intention of the section is concerned, but is he suggesting there may be a time when privatisation of the company will be considered? I suggest he would find that we would have to go a great deal further to restore the health of the group before that would become an attractive proposition for the ordinary private investor.

I will end by repeating what I said at the beginning. We are anxious to see progress made to improve the capital structure of the company, for all the reasons I gave: in the interests of the sugar beet producing farmers, of the company workers and in an effort to develop ways in which we can expand the industry and improve it, based on home produced raw materials. I would insist on the point that the House should be given more information, more detail on what is planned with the capital put into the company. The Minister has gone some distance this evening in indicating that the £30 million he proposes to allocate this year will be additional to the programme of the type he outlined. I am glad to hear that because there were rumours recently to the effect that of the £65 million extra capital proposed in the Bill, £30 million was to be made available without conditions and the remainder made available possibly with conditions. I am glad the Minister has dispelled that and that we can all be sure that constructive use will be made of this money.

The Minister should give us some assurance on the operation of the company. A number of doubts have been raised recently by allegations concerning the operation of sectors within the company. The House needs to be assured that that kind of thing cannot happen again. The House should also be told what is being done to avoid that. We have particular responsibility in the matter but the workers of the company should also be given that information and so also should those who produce the raw materials and the clients. We are all committed to the further development and expansion of these operations to the maximum possible extent. Measures that will clearly prevent a recurrence of this situation can only do good in the context of that kind of expansion.

Mr. Higgins

On behalf of the Labour Party I should like to welcome the Bill. There are a few points I should like to make in so far as reference has been made to the history of Comhlucht Siúicre Éireann Teoranta, to recent matters of controversy affecting the company and to not so recent controversies surrounding some of its operations in the different regions. When I listened to speeches about the background in which the company was founded and in which it operates today I am always amazed at the manner in which people who should know better in the matter of economics choose to be silent about great omissions in relation to, for example, the operation of the company's plant in Tuam. One of these is the absence of planning for the food processing sector. The company which has been in existence for almost half a century has had to operate for those 50 years in an atmosphere in which there has been no systematic planning for the food processing industry, for the inputs to that industry, its structure its organisation, the employment yield of that sector or any of the regional conditions that might be attached to planning in the food processing sector.

Equally, there has been no attempt to set the different plants of the company into any regional economic setting, in other words, to assess the impact of the capital allocated to its different operations in a regional setting or assess the impact of the institutions in terms of regional employment patterns. I often wonder about that because the idea of a planned sector within the economy is not new. Neither is the idea of regional economics. What is old, vulgar and reactionary is the idea that economics consist of the market place, and the market place only. That is an atmosphere in which this company has been forced to operate for decades. When the company was founded the people who turned the stones in the different factories which it quickly established spoke of the social impact that this investment in the thirties would have. Today when people read of the affairs of the company they seek to test it narrowly by the market place. That is fair enough but at what stage did social criteria give way to commercial criteria? At what stage was one set of criteria clearly abandoned and another put in its place? Do both exist today? I suspect they do in an atmosphere where there is an obdurate opposition to planning the economy. Where there is both ignorance and obduracy in relation to regional planning it is natural that we would have some kind of schizophrenic atmosphere in which sometimes the contribution of the Sugar Company's different operations will be discussed in terms of their social importance in different areas, particularly in relation to employment and very often in relation to their contribution to some employment for small farmers. Every now and again its products have to be sold in the market place and we make a kind of leap to see how its products are performing there.

I know my own voice is a minority in this regard. In the land of the blind there are those who want to go on imagining that the absence of planning is not important, that regional planning is a type of cranky novel idea, that the idea that we would, for example, specify whether purposes of investment were social or simply commercial, and I am prepared to live with that. At the same time I must put it on record that the company for most of its existence has a fine record for seeking to innovate, establish new things and introduce new techniques in Irish agriculture in an almost impossible atmosphere. I should like to be more specific. I believe when the history of the company comes to be written there will be many people who will want the historian to write not only of what the company did but also what it was not allowed to do, and why and where the opposition came from. Those people will want the historian to write about the times when, for example, the marvellous people who chose to take up employment in this State company rather than going into the private sector first established factories, introduced techniques and made many more suggestions but then were told that there were people in the private sector who were upset by what they wanted to do, who were upset by the conditions they wanted to put into even their regular operations and how they must give way. They were told that they must not, for example, stretch out sideways into all the different elements of Irish agriculture. It must be remembered that Irish agriculture was changing through those decades and was moving from being labour-intensive to being capital-intensive as it is today. The techniques in agriculture were changing and new forms of machinery were being introduced. Even to the most minor forms of machinery the company was blocked from becoming involved.

I can recall an old farmer telling me on one occasion that the company could not produce a galvanised bucket if there was some private bucket manufacturer lurking around the backward Irish economy of the day. The company came through this backward, private sector-obsessed economy into the modern period. It has to its record that it provided employment — those figures are contained in the Minister's speech. We are aware of today's employment figures but what the company provided over the years is equally important. If the national economy was decaying before the so-called opening up of the Irish economy took place at the end of the fifties the regional economy almost did not exist in terms of any income being circulated or employment being provided in the regions. I applaud the people who founded the factories in rural Ireland and who gave jobs initially to those who wanted to work with a product that was related to something they and their families had experience of, the food industry. Equally they gave employment within the cycle of small farmers. That was very important. They will be applauded for it.

It is interesting that today the Sugar Company are being assessed in terms of the present markets which exist for Irish food. It might be appropriate to offer an old fashioned note about the Irish food market. It has changed to one of great dependency on imported products. I regard myself as one of the few parents in Ireland who is rearing his children independent of Heinz baby food products. Our food market is dominated by foreign products.

The Minister should direct his attention to some of the marketing conditions in which the Irish Sugar Company are forced to operate. Is the Minister satisfied that the conditions some supermarket operators are insisting on in relation to the Sugar Company could be regarded as fair trading practices? Is the Minister satisfied that there is no supermarket chain telling the company that they must allow their sugar to be processed by companies who may or may not be using Irish sugar and who are involved in the processing of sugar from abroad and products such as flour, or face the threat of their other products being removed from the shelves? If we speak about the confused atmosphere in which the Irish Sugar Company are being forced to operate in terms of the absence of any planning and if we speak of their products going to represent a greater proportion of food consumption, we need to be assured that fair trading is being practised by those who are dominating consumer patterns.

I listened to two excellent speeches on this Bill by the Minister and Deputy Dukes. I was impressed by how much positive purpose is shared around the House in terms of the future role of Comhluct Siúicre Éireann. I share that optimism. What I worry about is the confusion which exists as to the criteria by which the performance of the company will be judged. I share the view with Deputy Dukes that one could know if one's investment was being spent wisely if one had the published programme of investment by the company for the years ahead. Equally, would Deputies agree that it would be easier to assess the state of that investment and its efficacy if we had any commitment to regional planning? That point is crucial. Suppose one does not approach investment by the Sugar Company in a plant such as Tuam within the context of a regional plan, what is one doing? Tuam becomes a project which has a question mark associated with it. It is like other projects. It joins Knock airport. To evaluate a plant or an aspect of a company's operations in this manner is piecemeal. One must ask what are the conditions within the region, what is the employment situation and what opportunities exist. In any speech I have read which was made in the Dáil on the question of the Irish Sugar Company or the operation in Tuam, I have not seen any assessment as to how these factors, such as agricultural factors in the hinterland of these plants, are being addressed in terms of corporate strategy. The physical structure, the size of farms, access to farms, relationships to market and the social composition of the people who own the farms all affect the ability of the people in the hinterland to produce beet.

One can take factories located in different places. One can cross all the headings I have mentioned and find differences in soil, size of holding and ability to relate to the market which are real and affect the ability to grow beet to supply to a factory in the region. These factors tend to be ignored. They are ignored as a specific omission within the general opposition to establish a plan for a region in which agriculture would be a component and within that there would be a plant for food processing which would relate to regional performance across a whole series of criteria.

If there is a programme within the company to assess how the money is spent, surely it is equally important to know the impact of the investment within the regional economy and society. It reveals an ideological conservatism that this question is not being addressed but rather that it is the specific performance within the Sugar Company which is being addressed.

We should have more information. When all the parades, marches, deputations, delegations, pastoral letters and so on were all over I kept asking myself about one point which struck me but which tended not to be emphasised and that was in relation to the insecurity about the future, the people who were not consulted and given very much information were the workers and organised trade unions even though there were worker directors within the company who could be elected to the board. The worker director legislation within which those worker directors had to function is and was seriously limiting as to how the information could be secured by the people involved and related to those they represented. I was appalled but not surprised by the absence of information. I was appalled because at the end of the day the people whose loyalty was given to the company were the workers.

It is arguable as to whether the factory was supported at all times by the people in the agricultural community. They failed to provide beet and other products when it was necessary. There is some evidence that there is a greater consciousness among farmers as to the importance of meeting the requirements and there is an encouraging response to which we should respond. The workers' loyalty to the company was never in question. One might say what of recent events? I offer a cautionary note. In the private enterprise economy in which we live, there are many examples of fraud and embezzlement which never come to light. Many companies,, banks and so on know it is sometimes better to buy off trouble. We need to be careful in relation to State companies. In their performance here they have been innovative. They have promoted people and given them responsibility on the basis of intelligence and ability. They have received public money and have been more accountable for it than many private sector firms which have received assistance from the State.

Can we truthfully say that the Irish private sector have succeeded while the State companies have failed? The lesson of history teaches us that private enterprise is good at recording profits. We have been told time and again by those marvellously honest people in the CII and other such people that they are there to make profits and that the State should get on with the business of employment creation; but we have often imposed social obligations on our State companies without being willing to develop an accountancy system to take that into account. I reject totally the idea that in modern times of increased economic competition, depressed markets, we can simply ransack through the economy taking this semi-State company or another and saying "This one does not look well in terms of commercial criteria". I repeat my question, a question I wish to leave on the record of this House and one to which I shall return again and again during whatever time I spend here: at what time in history was one set of criteria, social, departed from in the interest of commercial criteria and where was the crucial decision that decided we must measure by commercial economic criteria alone the performance of State and semi-State companies?

In my brief time in public life I have seen within the regional economy, of which Galway is a part, people make chewing gum for Italian factories and crolly dolls which sometimes were sold and at other times were not sold. I have seen the food processing sector being allowed to stagnate because we lost out on the many opportunities in that field. We lost these opportunities in the early decades by reason of waiting for this magic private entrepreneur to emerge to make all the money for us and then when we opened up our economy our retail patterns were dominated by these people. The decisions in relation to food were taken elsewhere so that we had almost lost the opportunities. It is very important that our own failures, and by that I mean our political failures, should not be allowed to be visited on the semi-State and State bodies who have been forced to operate in an atmosphere of political and economic schizophrenia.

I welcome the IDA publication, Strategy for the Development of the Food Industry and I would agree, too, with the Deputy who says that if we knew how this fitted into the programme of development the Sugar Company might have, it would be of benefit. I agree that the more published information we have the more we will know about our investment.

In the course of my remarks I have been concentrating perhaps too much on aspects of beet production. We must bear in mind always that there is no company either in the private or in the semi-State sector in any country that has stayed with one product without diversifying from it for more than half a century. I make no apology for saying that if the Sugar Company had been released down through the years into other lines of production, into becoming involved in other areas that had been cornered by the private sector, this situation might be very different, and let us be clear that what we are talking about is the native private sector. Later when the natives became socially mobile we opened up for the foreign private sector. It is important to bear that in mind. We have not been fair always in assessing the performance of companies like the Sugar Company. I wish this company every success in the future. I admire and applaud the people who have worked for the company down through the years and I look forward to a time when there will be a planned economy, when the food sector will be more exciting to work in, but in the interim I wish to place on the record my appreciation and admiration for the people who have gone into the public service in companies such as the Sugar Company at times in which the only context in which they had to work was a non-primed economy, no food sector production plan and a great deal of political uncertainty.

Mr. Kitt

I welcome this Bill which in essence will be the means of improving the capital structure of the Sugar Company by raising the limit to £75 million. I congratulate the Minister in bringing forward the Bill. As the Minister stated, the Sugar Company have been a major employer for 50 years during which time they have changed the face of rural Ireland and of the west in particular. In addition to the direct employment in Tuam, for instance, there are light engineering works, haulage and turf cutting machinery and the cultivating and harvesting of the crop. In Tuam alone there are more than 600 jobs in the sugar beet industry. The company have a fine record. The only years in which they did not record profits were the past two years but some of the reasons for that are given in the report of the Joint Committee on State-sponsored Bodies. I might not be as complimentary as other speakers have been about the report of that committee, particularly in respect of some of the recommendations that were made, but the report did give some insight into the problems of the Sugar Company. I was in the Seanad when the report was debated fully.

I concur with Deputy Higgins concerning the encouraging response to the growing of beet in the Tuam catchment area. This year the acreage under beet is more than 7,000, which is an increase of 25 per cent on last year or of more than 50 per cent for the past two years. That is the kind of response that is needed if we are to reach our quota of 182,000 tonnes. Like other speakers here, I hope that that beet acreage will be increased. After all, in the interests of the long-term future of the factories, particularly the factory in the west of Ireland which has certain handicaps, it is very encouraging to think that that acreage is increasing. I welcome the Bill and I am glad that it will correct the under-capitalisation of the Irish Sugar Company.

Mr. Hegarty

I too welcome the Bill. I welcome in particular the additional clarification we have had from the Minister this evening. It is unfortunate that we are trying to crowd this important legislation into such a short time at such a late hour.

It has been said by both the Minister and Deputy Dukes that the Sugar Company have proved to be a very vital part of our agricultural history. Deputy Higgins rightly stated that the company in their initial stages were founded for social as well as commercial purposes. I doubt if otherwise we would have had a beet factory located in Tuam which is not the ideal location for a sugar company. Down the years — I can go back a long time — that company were faced with massive problems. Apart from finance, in the early days there was the difficulty of growing the crop, getting people to keep it clean, the difficult manual job of pulling and harvesting the beet and so on. It has left a sort of bad taste in the mouths of the farmers but the money was good. This is why, if for no other reason, in rural Ireland sugar beet survived and flourished

In regard to technology, much of that was developed by the Irish Sugar Company themselves. I accept Deputy Higgins's point that they were prevented in many cases from developing the machinery technology in many other areas but we have developed in this country the only successful sugar beet harvester. It is the best machine in the world for Irish and UK conditions, small acreages and so on.

For social as well as commercial reasons we founded Erin Foods with Sugar Company funding and Sugar Company staff without any particular investment from any government. Basically the Sugar Company were asked to set up Erin Foods under Lieutenant General Costello. It was the Sugar Company technicians who initiated it in Carlow, Mallow, and eventually in Midleton and Fastnet and then we had the potato plant in Tuam. Some of these companies have unnecessarily gone by the wayside and there is no point in talking about them, but we can grow the best seller in the world in West Cork and we are no longer doing so. Some of the best horticultural crops in the world were grown in the Carlow area and now we are limited to Mallow and Midleton. However, there are plenty of processing plants around to do a good job. The problems of the Sugar Company were financial. The company themselves were always under-financed and it was too much to expect them not only to finance their their own operations where they had a monopoly on the sugar side, but also to finance an operation in food in which they had by no means a monopoly. In order to succeed we had to go outside this country for our markets and this is where our problems started. The multi-nationals pounded us left, right and centre when we crossed the Irish Sea. We attempted a small television programme in Britain in one area which I remember well, and they came in the following evening with massive television programmes and money and drove us out of that market. It was a pity because it would have benefited those companies had they allowed what was basically a very diminutive competitor among them. The change has come about rather slowly but very surely. We now have the rather anomalous situation where Batchelors are coming to us to ask us to grow and to process for them, and they are delighted with our product. Having failed themselves to get what they wanted, they can now get what they want in east Cork and Mallow.

Coupled with that, we have our own R & D in Carlow, if the Minister has not already done so I suggest that he take a day off and visit the R & D plant in Carlow and see for himself the advance that has taken place there with regard to food technology and what they are doing with little dinners and all these products which are so convenient for everybody, civil servants and so on, who have to take a quick lunch and all they need do is add a little boiling water and in two minutes they have a lunch. It is completely new, developed by us and nobody else.

To consider doing anything regressive with regard to food is unheard of. Of course the Sugar Company are going through tough times and even with this additional capital, things will be tight and tough. Basically our problem, as in other areas, is our national inflation which has gone through the roof. We are no longer as competitive as we should be and other people can come into the markets that we once controlled and sell cheaper than we can. We must tackle this because it affects also the farming side, even with sugar beet. The Minister mentioned in his speech, and he was right, that we have a falling off in acreage. That will have very serious consequences for the group, not to mention the factories. The falling off in acreage has very serious consequences for the Sugar Company group because they need extra acreage to stay in business and they are not getting it. The reason is that sugar beet is not as lucrative as it used to be, basically because of high cost and high inflation. I believe that in some areas there is a swing to dairying and that applies to some extent in our area. We had a very unsatisfactory situation which sorted itself out, but in that we lost some very good growers. A series of little things can cause problems.

I have nothing but admiration for the Sugar Company. They have initiated within that group a farm machinery section in Carlow which at this minute is starved of funds. People with the greatest inventive brains in the world down there who have developed machines of the highest quality are working on the machinery floor because we have not enough funds in that machinery section to allow them develop, expand and create jobs. It is the old story. When the scare is on we pull back instead of going forward, and forward we should and could go with regard to the Sugar Company.

Once we get our economy right — and this must be done sooner rather than later; we cannot wait too long to get inflation under control; we heard a good deal about that this morning in the Council of Europe — we will get this crop back to its former glory and stature because it is a good cash crop. It is also a useful feed crop for animals. This is a first class field for producing grain. The sugar industry employs something like 25,000 people.

Debate adjourned.