: This Bill has come before the House as a matter of urgency, such urgency that I got a copy of it only this morning. Included with the copy of the Bill was a copy of the Minister's Second Stage speech. In view of the urgency which was signposted in getting this Bill through I would have thought that the Minister himself—I say this with all due respect to the Minister of State—would have been able to come into the House to deal with a Bill which on his own indication was a matter of very considerable urgency and importance. There are some very important issues to be discussed on this Bill which normally we on this side of the House and I in particular, as a former Minister for Finance knowing the role of the ICC, would wish to promote and support in every way possible. For that reason it is strange that the Minister who signposted the urgency and importance is not here himself to deal with what is undoubtedly an urgent and important Bill. Also, as we shall see later, not only does it create a precedent in respect of the board structure of the ICC but very likely creates a precedent for other semi-State bodies at which the Members of the House, were they aware of it fully and had they the time to consider it, would look with a certain degree of apprehension and some with a degree of total opposition, not least of them the party represented by the Minister of State in this House at this moment. I do not even know if his own party have had an opportunity of considering the full implications of section 5 — we will come to it on Committees Stage — which were not clear until the Minister's speech today, a copy of which I got this morning, indicated the purpose of, namely the extension from seven to nine members of the board, the additional two of whom it now seems will be representative of the main shareholder, namely the State. By that one can only assume that we are talking about direct civil service representation on the board of ICC. I will come back to that in a moment. It is one of the matters that makes this Bill of particular importance not just for the ICC but for other semi-State bodies also.
I welcome the Bill as far as the first three aims stated by the Minister are concerned. The fourth is the one on which I have the reservation. It is appropriate that we should welcome the Bill because this is the fiftieth anniversary of the establishment of the ICC, whose role in this year of developmental needs in our economy of the need to support and promote the efforts of entrepreneurial activity, marketing, management, and development of our small companies, is clearly more evident than it has been at any time since it was established by Seán MacEntee, who is still, happily, very active. I join the Minister in his generous tribute to Mr. MacEntee and men of that generation who saw the need for the development of this kind of State support to help entrepreneurs who lacked technical know-how and management and accounting experience which the infant industries of that period were bound to face.
The success of the company is attributable to those pioneers and to those who have been associated with it over the past 50 years. That reflects particularly on the management and board of the ICC who have had, and still enjoy, considerable achievements. The ICC gave support to many major employers throughout the country. One example is Cement/Roadstone. Without the essential support given in the early days to such companies, which now play a very important role in our economy, we would not have seen the growth which has developed. There is a new turn in our economy — the national and international recession and our growing population which requires that we will be able to accommodate not just their needs but their potential—and the role of the ICC and like bodies is of more importance now than at any time since they were established.
The role of the management of ICC will become even more important not least because of the advice, assistance and liaison they give companies seeking loan finance. From my experience as Minister for Finance, to whom this board were responsible, I know that this board, in the person of its chief executive, chairman and members, discharged in the best possible way the responsibilities which had been thrust on them. I had the opportunity of meeting them both as Minister for Finance and as commissioner and had consultations with them in relation to activities of the European Investment Bank. It will be noted from this year's annual report that they have developed a considerable loan base. I have full confidence in the management, executive and the board of this company as they now operate. That is why I have considerable reservations about the proposals to change the composition of the board in what I regard as a significant and, frankly, unhelpful way. I do not want to be critical of the civil service, but I will come back to that later.
It is important to recognise that this company have shown a profit in every year of operation. That is a headline which needs to be brought home to many State companies which do not seem to be able to demonstrate their capacity to qualify for what the Americans call the bottom line criteria. The role of semi-State companies is to take on responsibilities by way of support, promotion, or, as in this case, loan finance, or advice for small companies in particular. They also have a responsibility to taxpayers. There has been evidence in recent times of a number of companies which have been unable to discharge satisfactorily their second line of responsibility, that is, to the taxpayer, and the degree of subsidy and support required is a matter of some concern. Fortunately this company is an exception to that regrettable trend. For that reason we should hasten slowly before making any radical proposals to change the structure of the board.
This company have paid dividends to the Exchequer every year since 1969. That, too, is a matter of very considerable importance. I note that 90 per cent of all the transactions of this company were with firms employing fewer than 100 persons. At this stage of our development we see a greater need for the development of our native based industries, and concepts of self-reliance which were characteristic of the thirties will have to be promoted as a central concept in our economic development from now on. We cannot continue to look to an outside world which is in recession to solve our problems. I would not take from the contribution of foreign industries here, but it is clear the major target for development in the future will have to be ourselves for ourselves, with the support of companies like the ICC. At present the development of resources in areas such as forestry, fishery and so on are outside the scope of the ICC. These areas indicate a new avenue for development.
The ICC have extended their range of activities into the hotel and tourist industries — apart altogether from the traditional manufacturing sector — and there is precedent for further extension in that area. I am very aware of the need to provide low interest rate finance for companies at the starting point, at the early stages of development or when they get into difficulties, which has happened to so many companies recently because of market conditions. When I was Minister for Finance the Government adopted my proposal to give exchange risk guarantees to the ICC to enable them not only to borrow at low interest rates but so that they could transfer the benefits to their customers — namely, our industrial promoters — and to give them that degree of security in relation to the borrowings they undertake and the advances they make.
It is clear that a sizeable proportion of their borrowing is in foreign currencies. Last year, as is evident from the statement issued by the chairman and chief executive when their annual report for 1982 was published, the losses arising out of the exchange fluctuations in which much of the borrowing was conducted was of the order of £1.6 million. I understand that a considerable proportion of the borrowing of the banks is in foreign currencies apart from the fact that the deposit base has increased at home. One of the reasons why I regret the absence of the Minister is that he recently told us in this House on the issue of devaluation that the actual net addition to the current budget this year, which is already three months through, would be £17 million. He did not, significantly, take account of the losses, as a consequence of his devaluation decision, on the borrowings undertaken by companies such as the Industrial Credit Company.
The Minister conveniently that evening ignored the cost of such exchange risk cover. If last year the bill for that loss was £1.6 million it is very clear that, as a consequence of the Government's decision to devalue our currency within the EMS — though it appears now it was not with the EMS currencies their preoccupation was at all but the change in the relationship with sterling which is not in the EMS —the bill for 1983 will be considerably more than that.
I presume that many of the borrowings will be in Deutschemarks. The Minister in coming to his calculation of £17 million was referring to the current market rate of the Deutschemark vis-à-vis EMS currencies, our own in particular. Virtually everyone agrees that the Deutschemark will appreciate in value vis-à-vis other currencies and already we have seen that trend develop. This will mean that the repayment cost of the borrowings we have undertaken will be affected very much more by the devaluation decision than the Minister has so far been prepared to indicate.
I am not saying that that accounts for the Minister's absence from the House at this stage, but I wonder what does account for his absence. I see our own Chief Whip is in the House. This matter was presented to us as being of extreme urgency and importance that had to get through all Stages today. It was of such urgency and importance that I could only have a copy of the Bill this morning. Naturally I am obliged to be here to debate this issue but I wonder why the man who is promoting the urgency and importance cannot be here to deal with it as well.
Of course it is clear that because the total borrowings for last year were of the order of £364 million the ICC is coming very close to its limit of £400 million under existing legislation. Nobody, least of all this side of the House — I presume we are all agreed on this — would want to leave any doubt as to the capacity of the ICC to extend its range of borrowing so we are prepared to support this Bill which extends the range of the borrowing capacity from £400 million to £800 million, which is an appropriate figure having regard to the developmental role of the company and the likelihood that we will not need to come back to the Oireachtas for three or four years to extend the borrowing rate again.
Virtually all of these borrowings must be guaranteed, and that means that the ICC is, like any State-sponsored company, in a privileged position. It is guaranteed by the State. This gives it a sense of security that merchant banks do not have. Because it has that it must be careful that it does not see itself just as a merchant bank, though I do commend its sense of responsibility to the Exchequer. It must take account always of its developmental role and the fact that it is basically to provide low interest finance over long terms to the promoters of this country. I have to mark at this stage more than an impression that this developmental role, as distinct from the role of merchant bank, is at risk of being overshadowed not least by this proposal to have representation from the civil service on the board. The ICC when it was launched 50 years ago was not seen as being a merchant bank. I hope it does not see itself as being that now. It must show a degree of involvement which, by and large, it is doing with its customers, a degree of advice, a degree of co-ordination and a degree of tolerance. I know the write-off of losses this last year have been considerable, but the write-off of losses in the associated banks and merchant banks has also been considerable. For that reason the ICC should not feel inhibited in maintaining what has been their fundamental role in this economy — that of service to our industry and to the small employment sector in particular.
It has in recent times too filled another role — that of rescuer of companies which were experiencing considerable difficulty. It was through the ICC that Fóir Teoranta was launched to deal with companies experiencing acute problems as distinct from those that would be drawing loan facilities and other assistance from the ICC.
For that reason I should like to refer to the liaison between Fóir Teoranta and the Industrial Credit Corporation. I am not saying that Fóir Teoranta feed only bad news. They have been doing a magnificent job but there is a risk that the ICC will be fed continuously with the bad news that comes through because of their association with Fóir Teoranta. Consequently, there may be a case for considering whether the close liaison that exists between the two bodies should be looked at again in the light of current circumstances. There may be a need for a greater degree of co-ordination with Fóir Teoranta by way of the rescue agency of the IDA. It is only in terms of managerial attitude that the ICC should be informed. I would prefer that they be free from the depression that might preoccupy them by their being too closely associated with the role of Fóir Teoranta who have a specific role and a role that they are discharging very satisfactorily. I suggest that the Minister keep that in mind. I am not saying this on the basis of any specific case of which I am aware, but I am aware of a number of small industries who find that the response they receive from the ICC is not as encouraging as it might be. However, I expect that in the nature of things that will be the case always. I should like to see the ICC maintaining a positive and indeed pioneering role and not in any way to be at risk of reacting to the depression in which we find ourselves or to the difficulties that might arise in any bank.
Before referring to what I regard as the unwelcome aspect of the Bill, there are a couple of other matters that I should like to put before the Minister. It is clear that the base of the financing of the ICC has changed considerably in recent times. I understand that 30 per cent of the loan facility available to them comes from the European Investment Bank. That is a very important dimension of the development of the ICC and it is of very considerable importance and potential so far as the country is concerned. The European Investment Bank has a particular role in promoting the activities of companies such as the ICC who play an important role in the economy. I am aware of that both from my experience as Minister for Finance and from my experience as Commissioner in Europe for 12 months. One can only encourage the development of co-operation and support from the bank to companies such as the ICC. I am confident that the potential for the further channelling of support from the bank is considerable. The ICC are very conscious of that and will exploit the opportunity in a responsible way to the maximum advantage.
As an indication of the role of the ICC I would point out that there was an increase of the order of 101 per cent in their deposits in 1982. That is a tribute to the aggressive marketing of the company in relation to their own role and in terms of the security they offer depositors. Most people would regard an increase of 101 per cent in deposits as being a considerable achievement but in this case there was the advantage of a State guarantee, something which the company's competitors do not enjoy. For that reason I underline that there is scope for extending further the opportunity for attracting small deposits into the funds of the ICC as has been done by their sister company, the ACC.
Having said that I hope that the general trend we have witnessed on the part of the Government and particularly on the part of the Minister for Finance in relation to small deposits, in relation to building societies and in relation to anything that might encourage thrift, responsibility and saving, will not have the result of discouraging the ICC from going out into the market place, especially to attract small deposits. If the ICC play an essential role for small industries, equally they should play a role for small depositors who have a sense of commitment and patriotism. But such depositors would need an assurance that their money values would not be undermined by such factors as devaluation. This is an important element.
Another aspect that concerns small depositors — and this is one about which I have had many communications since the budget — is what appears to be the preoccupation not only of the Minister but perhaps of the Department of Finance with Exchequer protection, with tax revenue in particular, without having regard to the other side of the coin, that is, the opportunity to provide at home a base of investment support from funds at home. I mention that in the context of the ICC being in a position to encourage broader-based deposits than has been the case up to now. Last year the full target for the ICC of £150 million was not reached. Perhaps that is understandable having regard to the general climate of recession in which this economy, as the most open economy in Europe, has found itself. But the ICC should be encouraged to reach in so far as possible the targets for new advances as set out in the Public Capital Programme.
However, when one considers what the situation was last year, when to say the least we had a public capital programme in which there was greater commitment to development in employment than is the case this year, one wonders what the experience will be this year in the light of a cut-back in this programme of £220 million. The various infrastructures, house building, roads and so on, will be affected by this cutback. One wonders, then what role the ICC will have this year. May we expect the Government to acknowledge that on every front development or support for development are not to be priorities? Should the potential of the ICC for development be frustrated rather than encouraged? The trend of Government policy as enunicated in the budget is not in any sense pointing to development but rather to a fiscal concentration which in present conditions may undermine the role of the development arm of our economy. For groups such as the ICC it is important that there should be some degree of security in the trends that will be promoted in the economy. The chief executive of the ICC, as reported in The Irish Times on 16 February 1983, was cautious about giving a forecast for interest rates. He said:
We are not expecting a dramatic rise and there is a possibility of a slight fall.
I am afraid that his lack of expectation of a dramatic rise has been seriously undermined in the meantime. We were told that the dramatic rise was necessary because of currency movements out of Ireland and now that we have had a devaluation I should like to know if we can expect a dramatic fall to ease the burden on industry who must pay a very high price as a result of the recent increase. The Taoiseach over the weekend said that if we do not see a dramatic fall in interest rates he would have to be told the reasons why, the implication being that if it is not going to happen through the associated banks in consultation with the Central Bank, the Taoiseach would ensure that it would. Some dealers this morning dismissed that saying: "With all due respect if this was Reagan who was talking maybe he could achieve what he said but we think Garret FitzGerald is in a different position". We saw enough in the House this morning to indicate that the words of the Taoiseach are not always followed by actions consistent with those words. At this stage I will not say any more; charity alone would oblige me to give him the benefit of my silence in respect of that. The industrial sector waits with bated breath for the implementation of the commitment by the Taoiseach on Sunday so that concerns such as the ICC who operate in this area get some breathing space from the suffocating high interest rates that exist.
I should now like to deal with the one element of the Bill that we intend to oppose strongly. It was not until today that we were made aware of the terms of section 5. Subsection 1 of that section states:
(1) The Schedule to the Principal Act, is hereby amended by the substitution in paragraph 3 of that Schedule of "nine" for "seven", and the said paragraph, as so amended, is set out in the Table to this subsection.
Effectively, that means that it is the intention to increase the number of directors of the company. We did not get the full story of why that is being done until the Minister introduced the Bill. We must give credit for honesty, if nothing else, because the Minister said that the primary purpose of the increase in numbers was to enable direct representation of the company's owner on the board of directors. That is a sharp reminder to the company. The Minister said that recent experiences in the State-sponsored bodies sector had pointed to the need for developing a closer understanding on broad policy issues between the Government and the boards of State companies and the proposed increase in the size of the ICC board was designed to facilitate that process.
I recognise the need to remind State-sponsored bodies of the need for closer understanding of board policy issues but I cannot under any circumstances accept that recent experiences have pointed to the need for the development of this closer understanding. The experiences of the ICC and the Minister for Finance would not come under that heading. That is clear from the Minister's speech this morning because he commended the activities of the company, its board and management. He commended the responsible role the company is playing and he drew attention to the fact that it has shown a profit each year since it was established and has paid a dividend since 1969. In spite of all that, but apparently because of general trends which exist in State companies, the Minister has decided to have big brother in the form of civil service representation on this board to keep him informed.
As a former Minister for Finance I am conscious of the need for a disciplined approach by State bodies but that does not mean that their management developmental role should be undermined in any way by the presence of big brother listening, watching and cautioning, as inevitably they will be doing, against any development of their role. This serious step will change the role of our semi-State structure. It is significant that the bridgehead is being created in respect of one of our most successful semi-State organisations.
Is that an indictment of the management and board of the ICC? Whatever mistakes Governments have made about appointments to State boards it can be reasonably claimed that special consideration was given to the calibre of those asked to serve on the board of ICC. Their calibre has been proved by their contribution down the years. The chief executive is recognised as being a man of the highest standing and commitment and so are the members of the board. Vacancies exist on the board and I am sure that the filling of them will not give rise to any political priority by the Minister. I would much prefer to see the representation on this board strengthened by the appointment of people of proven experience in the business, banking and related sectors even if they represent Fine Gael or Labour. Labour may not claim to have many such people but I believe they have such people lurking somewhere. Should Labour not say: "Should the appointments not be in line with what we have been saying about State boards — worker representation on them". Would that not mean something more than having big brother from the Department?
This backward step is being proposed at short notice and while we support the Second Reading of the Bill we will be opposed to section 5. Not only is it contrary to the ICC and the employment programme the company support but, more significantly, it is an indication of Government thinking. As a former Minister I know how the officials of the Department of Finance feel. In fact this notion was suggested to me when I was Minister and I believe it was suggested to my successor, Deputy Gene Fitzgerald but it is significant that it never got beyond being a suggestion until Deputy Dukes was appointed. For the first time the role of the semi-State bodies is to be changed and I do not think we will see a great beauty being born. The Minister for Finance should be told that he is moving into uncharted and dangerous territory which will change the whole nature of semi-State activity, particularly of those who up to this time have proven by their record and the record of those who depend upon them, the small industrialists, that they have been a considerable success. I do not want to see that success undermined by shortsighted approaches from the Minister for Finance.
