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Dáil Éireann debate -
Thursday, 28 Jun 1984

Vol. 352 No. 5

Irish Steel Limited (Amendment) Bill, 1984: Second Stage.

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

The purpose of this Bill is to increase the authorised share capital of Irish Steel Limited from £50,000,000 to £120,000,000 and to provide, as a consequence, a similar increase in the value of shares which the Minister for Finance may take up. This will enable debts owed by Irish Steel and guaranteed by Exchequer to be repaid by means of an injection of equity.

Irish Steel owe £99 million. All of this is guaranteed by the State under guarantees extended by various Ministers. It has also received a grant of £25 million in 1981-82 and equity of £5 million in 1982-83 from the taxpayer, all of which has been expended.

These debts (net borrowings) increased in the following way — 1979, £13.5 million; 1980, £28.6 million; 1981, £52.5 million; 1982, £62.1 million; 1983, £77.2 million; 1984, £99 million. The cost overrun for the new plant which was completed in mid-1981 was £26.5 million, above an estimated £38 million, and this amount is included in the above figures.

All of this money is already owed. In converting some of the £99 million in guaranteed debt into equity we are not increasing the capital liability of the taxpayer. These debts are already guaranteed by the taxpayer, and most of the debts, 53 per cent, were incurred prior to 1982. We are simply relieving the State owned company of the need to meet the interest payments out of trading profits and transferring the liability for these interest payments to the Exchequer.

If this equity injection were not made Irish Steel would close straight away. Then the entire debt would fall to be met by the taxpayer anyway. The decision the House is being asked to take in approving this Bill, is whether Irish Steel plant should not be closed without being given a last chance to prove itself. The key factor here is whether continued operation will add to, or reduce, existing losses. In assessing this question, the Government availed of the assistance of the consultancy firm SOFRESID of Paris.

Irish Steel Limited is a wholly State owned company with fully paid up shares amounting to £30 million held by the Minister for Finance. The company's accumulated losses at 30 June 1983 were of the order of £43 million. While it is expected that the loss for the year to 30 June 1984 will be in the region of £21 million, it is clear that the level of borrowings is far too high and that a significant injection of equity is necessary in order to correct the major imbalance in the company's financial structure if the company is to continue in operation.

Deputies will be aware that no financial aid may be provided by a member state to a steel undertaking without the prior approval of the European Commission and aid for the continued operation of a steel undertaking may not be paid after 1984. A notification of the maximum level of aid which the Government might provide to Irish Steel was sent to the Commission in September 1982 to meet the deadline set by the Commission for the receipt of such notifications. The maximum aid envisaged in that notification was the guaranteeing of further borrowings of £25 million and the provision of share capital of £89 million.

While it is expected that the loss for the year ending June 1984 will be £21 million, this will be made up as to £12 million by interest, £4.1 million depreciation and £4.9 million in operating losses. This equity injection will enable much of the debt on which the interest arises to be repaid. The depreciation is relevant only in so far as the eventual replacement of the mill at the end of its useful life is envisaged. The operating results are the most immediately relevant factor in deciding on the continuance, or otherwise, of the mill. The projected losses on operation this year of £4.9 million represent an improvement on past performance. The operating losses in 1980-1981 were £8.2 million, in 1981-1982 £6.4 million and in 1982-1983 £5.7 million.

The question as to whether this downward movement in operating losses would continue and whether the company would get into an operating profit situation has been the subject of deep study both at national and EEC level. Obviously if the company were able to get into a permanently profitable situation it would be able to make some contribution towards the redemption of the debts incurred in the past. If it were closed straight away all the debts would fall due and no contribution would be made.

The House will recall that the consultants, SOFRESID, were jointly appointed by the Government and the Commission in July 1982 to carry out a major assessment of Irish Steel's viability prospects. They concluded in September 1982 that the company's costs were not competitive. Nevertheless, on the basis of certain assumptions in relation to prices, reductions in production costs, including a £15 per tonne of steel produced reduction in the cost of electricity, growth in sales and revenue and the provision of additional State funds of up to £89 million, the company could, in the consultants' opinion, be viable in the long term and should be allowed to continue in operation. The consultants warned, nevertheless, that if it were decided to keep the company in operation and to provide the additional funds, there remained the risk of failure due to the extreme difficulty of breaking into the export markets.

On 29 June 1983 the Commission gave its decision on the application of the Government for approval to invest up to £89 million in Irish Steel in 1984. The main provision of the Commission decision was that the proposed aid was not compatible with orderly functioning of the common market and might not be paid to the company unless the Commission was satisfied, on the basis of information to be supplied to it by 31 January 1984, that the company could be financially viable by the end of 1985 without any further aid.

The Commission decision of 29 June 1983 also stated that the aid necessary for the continued operation of Irish Steel up to 31 January 1984 could be paid as long as the company was not in breach of the rules of the European Coal and Steel Community, particularly those relating to quotas and pricing. The Commission subsequently approved the giving of Government guarantees in respect of an additional £14 million which was necessary for the continued operation of the company and recently approved the giving of Government guarantees for a further £3.5 million.

In September 1983 the Government again engaged the consultants to reassess Irish Steel's viability prospects in the light of the company's performance since their report in September 1982. The consultants in their report of December 1983 commented very favourably on the results achieved by Irish Steel since their earlier report and indicated that the company had set up a distribution network, diversified its product range, kept to its rolling production programmes and placed its customer relationship on a sound basis. The consultants expressed the belief that from a marketing point of view, Irish Steel has overcome the most difficult hurdle: a significant breakthrough into the European market.

Information to enable the Commission to decide whether in its opinion Irish Steel would be financially viable after the end of 1985 without further State aid, given a conversion as of that time of £89 million of debt to equity, was forwarded to the Commission in January 1984. Arising from that information discussions with the appropriate Commissioners and with Commission officials have continued since then. Resulting from them the Government and the Commission decided in May 1984 to jointly re-engage for a third time the consultants to undertake a further investigation in order to reconcile the varying views and to indicate whether Irish Steel could meet the Commission's requirements for financial viability after 1985. The indications in the consultants third and most recent report are that Irish Steel can meet the Commission's requirements for financial viability after the end of 1985 provided the company is given the quota upon which the report is based. I understand that the Commission took an interim decision yesterday which allows £36 million to be provided to Irish Steel pending a decision on the quota question.

I would now like to turn to the market in which Irish Steel must sell its products. The company has made considerable strides in the past year or so but the situation in the overall market remains depressed.

However, the Commission's forecast for 1984 does envisage a slight improvement. Community production of crude steel in recent months has shown an increase over corresponding months in 1983. Overall the state of the Community steel industry is better in 1984 than it was in 1983 but recovery remains fragile. Because of the major overcapacity which has existed in the Community steel industry for some years, there has been a tendency for supply to exceed demand. This has meant a consequent downward pressure on prices, a deterioration of the financial position of producing enterprises and a consequent restriction on the creation of resources enabling them to finance plant modernisation. The Commission are trying to remove this excess capacity through the implementation of the "Aids Code" which restricts aid by Governments to steel undertakings. Present indications are that capacity reductions are likely to go beyond the targets set by the Commission and could be of the order of 30 million tonnes by 1986.

Among other measures currently being operated by the Commission are a system of production and delivery quotas, minimum prices for certain steel products, and more stringent measures to prevent infringement of the quota and price rules.

The House will be aware that the Commission have since 1980 operated a system of production and delivery quotas which is due to terminate at the end of 1985. The main objective of the system is to control the supply of steel products coming on the market so as to prevent prices from collapsing and thereby allow the steel industry to restructure within a stable context.

To date the quota system has not created major problems for Irish Steel. This is because so far, Irish Steel has been operating well below its technical capacity because the mill is only recently commissioned. From now on, however, it will need additional quotas, as the present system is unduly restrictive in its case.

Indeed the basis on which SOFRESID has expressed confidence that Irish Steel Limited can reach profitability is that it has so far been working well below capacity. If it could approach its capacity output and sell that output at reasonable prices, it has excellent prospects of making operating profits. At the moment it is only producing at little over 40 per cent of its capacity. That is to say that unless appropriate increased quotas are granted to Irish Steel it will not be able to become viable and will have to close very quickly. I raised this problem at the Steel Council meeting on 26 January, 1984. The Commission at that time declared their readiness to submit a proposal to the Council for alleviating these problems. This was on condition that the restructuring programme had enabled it to acknowledge the viability of the undertaking after 1985. While it is not certain that the Council of Ministers would agree to such a proposal from the Commission, I would hope that, in view of the relative insignificance of the capacity of Irish Steel's plant in the total European context, the Council would agree.

Notwithstanding the quota system, the price of certain steel products deteriorated considerably in the second half of 1983. The Commission therefore felt it necessary to introduce minimum prices for these products with effect from 1 January, 1984. The Commission also introduced tougher measures to prevent infringement of the quota and price rules. Under these measures each steel producer of the products covered by minimum prices is obliged to lodge with the Commission a security deposit, based on his quarterly quota for delivery on the Community market, which will be refunded to the producer the following quarter provided he has not been found to have infringed the quota or price rules during the quarter question. If, however, the Commission finds that a producer has infringed the rules it may require heavy fines to be deducted from the security deposit.

A favourable decision by the Commission on the viability question, a suitable adjustment of quotas and the investment of £89 million by the State will not of themselves ensure the future of Irish Steel. The company must continue to increase the volume of its sales, reduce production costs and obtain realistic prices for its products at a time when the international steel market is still very depressed.

As far as production costs are concerned, it must be stated that one of the disadvantages facing Irish Steel is the high price it pays for its electricity supply compared to the prices prevailing in other member states. The SOFRESID consultants state that the ESB tariffs represent a disadvantage to Irish Steel of £15 per tonne of steel produced compared with a reference plant in France. This was a feature of their 1982 and 1983 reports and they recommended in their first report that if this disadvantage could not be eliminated by a reduction in electricity tariffs or other cuts in costs, Irish Steel should be closed. In their 1983 report they regard the total cost disadvantage as having been reduced to £12 per tonne but the electricity component of that still remains at £15 per tonne which is compensated as to £3 by other reductions.

A comparison of domestic and industrial electricity tariffs, exclusive of tax, in Ireland with those in seven other member states of the Community indicates that the tariff structure in Ireland is substantially less favourable to industry than is the case in all of the other seven member states. An indication of this disadvantage is that at given levels of consumption Irish industry pays over 93 per cent of the domestic rate per kilowatt hour compared with an average of less than 72 per cent of the domestic rate for the other seven. The consultants concluded that electricity tariffs in Ireland, unlike those in the other countries, provided no incentive to industrial development. Because of the importance of electricity charges to heavy industrial consumers, such as Irish Steel, the Government have decided that the Minister for Energy should bring before it within a month an assessment on energy pricing policy.

It will be clear to Deputies from what I have said that the difficulties facing Irish Steel are considerable. The company must achieve an increasing level of sales at a time when the steel market continues very depressed and when many producers in the Community are being compelled to reduce their production capacity because of the imbalance between supply and demand.

Irish Steel has a modern, flexible plant which can adjust to changing patterns of demand and which, according to the consultants, is one of the most technically advanced plants in Europe. As far as sales are concerned, the company have made considerable progress in the past year in that the volume of sales for the year to 30 June 1984 is expected to be some 40 per cent higher than that achieved in the year to 30 June 1983, which was more than double that achieved in the previous year. While this performance is encouraging, much more remains to be accomplished in relation to costs, prices and sales if the company are to have a secure viable future. The task facing the company should not be underestimated, and a dramatic improvement in the steel market simply cannot be expected or assumed.

As I have already stated, the company have State-guaranteed borrowings amounting to £99 million and this Bill allows for the redemption of debt. It is our hope that after this conversion of debt into equity the company will become viable. If it does it will be able to service and repay all the remaining Government-guaranteed loans and make a return to the State on its investment. There is, of course, the risk that the company might fail to make the necessary progress towards viability. The additional risk to the Government between the cost of closing Irish Steel now and its closing at a later date if not viable, is in the region of £5 million. This limit arises from the fact that, if the trading position deteriorated to that extent, the company would have to be closed because the Commission will not permit the State after the end of 1984 to assist the company any further by way of investment, grant or guarantee. Therefore the additional risk capital represented in the decision to introduce this Bill and allow Irish Steel a last chance is £5 million in current money terms.

From the end of this year the company will have to finance their operations in a normal commercial manner without any recourse to the Government.

I repeat that much remains to be done before the company's future is secure. It will be up to all who work in the organisation to co-operate in ensuring the efficiency necessary to safeguard the future of the company.

To conclude, I hope that, in spite of the many difficulties facing Irish Steel, the future of the company can be assured. I am confident that the Bill will commend itself to the Dáil and I recommend it for approval.

I will try to be brief because I understand a number of Deputies from the Cork region are anxious to contribute. This industry is very important to that area and I will try to be as accommodating as I can. Perhaps Deputies opposite would also bear that in mind.

This is yet another Bill in the history of Irish Steel Holdings Ltd. I will deal first with the manner in which this decision has been reached and the regrettable treatment it has been getting in the House. I will then deal with the basis on which the decision was made and the judgment which was exercised. Thirdly there is the future prospect for Irish Steel.

I would remind the House that some three or four weeks ago I asked the Taoiseach on the Order of Business if the Government intended to introduce legislation in this Dáil term to take additional equity in Irish Steel. My purpose was to elicit from the Government the position of Irish Steel, realising that a decision would have to be made in June or July. The Taoiseach's reply was totally non-committal. The only interpretation I could make was that it was not before the Government. If it were I would have expected to be told that legislation would be before the House during this session. The Minister will recall that I have tried at Question Time to find out the position of Irish Steel. I was fully familiar with the position in 1982 when I was for a short time Minister for Industry and Energy, but I was not familiar with what had happened since.

We are talking here about £90 million of taxpayers' money. The least the people are entitled to expect is that we will show responsibility in the way we deal with it, yet we are to spend only two hours debating this matter on the second last day of the Dáil term. This is not in keeping with the stated policy of the Government, who have made a virtue of financial management and fiscal rectitude. The manner in which this matter is being handled is not in keeping with this policy. When he was Minister for Finance Deputy Bruton expressed very strong views and produced a booklet entitled A Better Way to Plan the Nation's Finances. I agree totally with him that the public are becoming cynical about the manner in which we handle large sums of their money. We are rushing through this Bill and we are not in a position to make a realistic assessment of the possibilities of future repayment.

I asked yesterday on the Order of Business if the three reports from SOFRESID, the French consultants, would be made available to me so that I could make a realistic assessment and give an objective view on the decisions which have been made. This is the responsibility of an Opposition spokesman. I do not think anybody would expect a spokesman to listen to the Minister's speech and then reply in an objective fashion. The Government have the three reports. The first one was in late 1982. I was very familiar with the initial briefing in September 1982, but there was a general election shortly afterwards followed by a change of Government. I am not familiar with what has happened since, except from reading in the Library the annual report of Irish Steel for 1982-83. I compliment them on being one of the semi-State bodies who produced their annual reports on time. However, 12 months is a long time and I can only base my judgment on the trends.

From the very difficult situation in which Irish Steel found themselves in 1982 they appear to have come a long way in many respects. I should like to have had the projections contained in the consultants' report in order to make a commercial judgment. If I were making a decision on £9,000 in business — never mind £90 million — I would look at the performance of the management, the projections made in the past and the subsequent performance, as well as projections for the future. Only in that way could one made a realistic judgment. I did not have the opportunity of looking at the reports but I thank the Minister for sending a civil servant to give me a briefing. I understand quite clearly the Civil Service position in this respect.

To make a commercial judgment one needs to have all the facts. The vital words in the Minister's statement are that the indications in the consultants' report are that Irish Steel can meet the Commission's requirements of financial viability at the end of 1985 provided the company is given the quota on which the report is based. We all know the industry took a decision last night, and quite obviously the Commission was satisfied, on the basis of all the information submitted to them, that Irish Steel can become viable. Obviously the Government are also quite happy that it can become viable. They are the people who have all the relevant facts and all the reports in front of them, all the projections and all the financial analysis available to them, and they have taken their decision. I accept that decision. I support it and I am delighted to learn from the Minister that such improvement has taken place. Nevertheless I have some questions to put to the Minister and some comments to make.

The first question is: can Irish Steel become viable? The criteria in regard to Irish Steel and all other semi-State bodies when Fianna Fáil were in Government was viability, and I when I was Minister applied that criteria. Now I accept the Government's bona fides in this. We can look hopefully to the future. That goes for one part of the Minister's speech. Reading other parts of the speech one begins to wonder how convinced the Government are. Nobody can be a prophet about the future, but from past experience in Government I am sure the Minister is quite good at making a commercial judgment. What criteria did he apply to his decision? I have heard the Minister from time to time enunciate the parameters of a decision. What criteria have been applied here? Is part of the argument a strategic argument? The Minister shakes his head. We have to import 70 per cent of the raw material on which Irish Steel operates, and for a successful future we will have to export two-thirds. There are no social implications and no political implications. That is fine. We are talking here about a straightforward commercial situation.

From the taxpayers' point of view, I said here on 29 June 1982 that the situation at that time in relation to Government bonds was £6 million. That is on the record. It is now £99 million. The money has already been paid. What worries me is the proliferation of Government guarantees. I recall the Minister on "The Late Late Show" being asked a specific question and his reply was that they were finished. Three days later a Minister of State in the same Department on a radio programme said they were not finished. Perhaps the Minister will tell me now who is right and who is wrong. It is quite true a proliferation has taken place.

I recall in 1982 looking at the projections for 1981-1982 period and only 40 per cent of those projections were met. I do not know what the projections for 1982-1983 were. I was asking for that information yesterday morning. What percentage of those projections were met? What were the projections for 1983-1984 and what percentage of those projections are being met? I extracted some figures in the Library. In the year 1981-1982 Irish Steel had a turnover of £13,018,000. In that year it had a loss of £21,013,000. The financial charge was £21,713,000. I looked at 1982-1983. The turnover was £23,691,000 and the loss was £20,291,000. The financial charges in that year included £10,403,000. I do not have any information after that. There was not a great deal of improvement in the situation in those two periods. I would love to have the third period for purposes of comparison to see what the trend is and what level of improvement there has been. That would give a better idea as to how we should judge the management of Irish Steel. I should like the Minister to comment on that.

We are all happy to learn that exports are up from £5.8 million in the 1981-1982 period to £14.1 million in the 1982-1983 period. I do not have the figures for 1983-1984 but judging by the figures I have the improvement is in the right direction. Recently I asked the Minister if the projections for Irish Steel were being met this year and his answer was they were being met in quantity but not in price. That would indicate to me that they still have not reached the price which would enable them to penetrate the market. What is his view as to when the discount for penetrating the market will cease? There are Community prices which would enable them to penetrate the market. Following on that what is the projection for the future in regard to prices? Will they have to sell below cost which they had to do in order to get their share of the market? I thought there would be more detail available. I know the Minister is not an expert but he has experts available to him and the Minister should be in a position to give us the figures. The Minister has made his decision based on all the information available. The Commission have made their decision and we have to accept that. All I am trying to do is extract information for the benefit of the House and the benefit of the taxpayers. We should be seen to be responsible in the way we approach the spending of this money. ESB costs are an additional production cost in relation to Irish Steel. The figure is something like £15 per tonne. I am glad to learn that Irish Steel has reduced production costs by £3 a tonne, which reduces the differential to £12 a tonne.

But we would be living in fairyland if we thought somebody would not have to pay if the cost of electricity is reduced to Irish Steel. If we are to give a reduction of £12 per ton to Irish Steel — and they are big users of electricity — then may I ask the Minister what is his and the Government's position as to who will pay? Will it be an additional cost to the consumer in order to recoup it for the ESB? I am quite sure the ESB will not be very happy to have to reduce the cost to any particular consumer. If so they would also find themselves in the position — if the Government decide to reduce the price to Irish Steel — that they would have Alcan and all the other large users knocking at their door the following morning. Perhaps the Minister would comment on the electricity situation.

I am also aware that because of their placement away from the centre of the market place Irish Steel have a transport disadvantage. As far as I am aware from my experience, way back in 1982, it is a very modern mill, probably the most modern of its kind in Europe. Probably whatever production advantages they would have would be offset by transport disadvantages. On the face of it there would not appear to be that much room for further reducing their cost factors.

Irish Steel are a big employer in the Cork region. We have all been very concerned about recent happenings in the Cork region. I understand they would have a workforce of 630. I do not know whether that size of manning compares favourably with similar manning in mini-mills in, say, France and Italy. Perhaps one would not be comparing like with like; perhaps the present range of products in Irish Steel, something like 84, demands this type of manning. I would agree also that the flexibility of a small plant operating in difficult market conditions should give them some advantage.

I would be somewhat worried about Irish Steel's marketing policy, I may be wrong here and, if so, the Minister can correct me on this, but they seem to be over-reliant on price only. Irish Steel has been in existence now since 1946 and should have established a brand name for themselves in the market place. But the situation still obtains that Irish Steel sell steel at whatever price they can get. For example, is there no acceptance in the market that Irish Steel produces good quality products and that they do not have to continue to take the bottom range of the market with regard to price. Without a brand name that is what happens in any market place and certainly in the steel market which is a rough game at the best of times. If they do not have any customer loyalty built up, if they must continue with cheap prices in steel to penetrate the market fully over the next couple of years then we must see matters in a realistic way. Perhaps I am wrong in my interpretation but it appears that the Minister is saying that after the end of this year there will be no more State aid to Irish Steel. Yet there is provision there somewhere for £5 million which I cannot quantify.

It is £5 million that is going in now and we might not get it back.

May I put the straight question to the Minister then, that if Irish Steel lose £5 million next year——

Commercial forces would——

——close them. That is a straight answer.

I would not put it just that way.

I would like to hear a little more about this from the Minister.

If the losses are £5 million over what is being provided for in this Bill, if they go £5 million over the projections then — because the Government cannot step in to help them out — commercial forces will place them in a difficult situation.

I think there is a bit of fancy accountancy work being portrayed in the Minister's script, as I see the position, because the Minister seems to totally disregard depreciation, and operating profit is really what the Minister is interested in and nothing else.

It is all there.

Am I right or wrong in that interpretation? If the Minister is relying on operating profit only——

He is under pressure.

——then I suggest that the Minister is not applying the commercial criteria to this decision and he said he was at the outset. Anybody in business who disregards depreciation and all the other accompanying factors — and let us be blunt about it, many semi-State bodies like to do so — are in for a shock. It must be remembered that Irish Steel will be operating in a commercial situation from 1 January 1985 when, I suggest to the Minister they can no longer regard operating profit as the be-all and end-all. They would then not be able to finance their projects and find themselves in deeper trouble. I know the type of accountancy in which they like to engage in semi-State bodies but if Irish Steel find themselves operating in the real world — as the Minister says they will be from 1 January next — I suggest that they will have to look at other things than operating profit.

The commission in their attitude and decision as to the viability of Irish Steel did make provision for depreciation.

I know they make provision but there is over-emphasis——

If they say it is viable, it is viable after depreciation. That is the way they arrive at their decision. Therefore, there is no question of their disregarding depreciation.

I will pose the question in a different fashion on Committee Stage. I do not want to hold up this debate on the matter. But it reflects the unsatisfactory way we have of dealing with it.

I do not accept that.

In 1982 when I had first sight of the initial report from SOFRESID, one of the great weaknesses they spelled out in Irish Steel was their product mix. I do not know to what extent that has been corrected in the meantime in relation to, say, successful French or Italian mills of similar size. They were producing the products more difficult to sell. Their view at that time was that it was essential for Irish Steel to increase their concentration on the production of sections, which was 90 per cent in a similar mill in France, both because the contributions from sections would be higher and they are much easier to market. Therefore, Irish Steel's product mix is an essential element in getting the whole of their future right but it was badly out of line in 1982. It was pointed out to them in September or October 1982. I hope they have corrected it but it is not easy to do so overnight. In the meantime I hope they have moved in the right direction.

In relation to quotas we received partial approval last evening in relation to the EEC. I know the Minister has had many meetings in Brussels with the EEC Steel Commissioner, Vicomte Davignon. I had similar meetings with him in September 1982. I think my judgment was fairly accurate at that time. Having first reminded me that he made a very strong recommendation when Irish Steel was being built that it should not be built, he recognised that Irish Governments can take their own decisions. When the important question of steel quotas arose he indicated to me that he could not foresee it being a problem because we represented only .2 per cent of the total Community market. Indeed he described it as a drop in the ocean and I see that some press correspondent in recent days described it as a pimple on an elephant's back. I should like to hear how the Minister views the situation with regard to quotas. I do not foresee them being a problem, especially now that the Minister prides himself on being an excellent negotiator. I am sure he will be able to deliver that for Irish Steel. The Minister is half way home and I believe he will come back with that deal.

He is on the straight.

The Minister knows the game in Brussels just as everybody else. Those are the questions I should like answered. I do not want to delay my colleagues on both sides of the House who have a direct interest in this. But, unfortunately, in Irish Steel they are lumbered — as are many other State agencies — with the cost of overruns on projects. The initial budget for this one was approximately £28 million and £12 million of working capital requirements. It ended up somewhere in the region of £80 million.

I have spoken at other times in this House about better project management in the public service. The situation at the end of the day, the bottom line, is that the taxpayer must bear the cost. With scarce resources we cannot allow this practice to continue — we had other examples recently — it is a subject for a different debate. What is important here is to ascertain whether all of Irish Steel's components are right for the future. The consultants have said that they will be viable and the Commission and the Government accept they are viable. We have always supported State enterprise where viability could be established because we believe it is the right thing to do.

This company have been lumbered with the excessive costs they have incurred. There were serious deficiencies in the design of Irish Steel on the part of the designers. I understand that it was not on a strict contract basis that they were set up in the first instance, and such situations are always a blank cheque for people to spend more and more taxpayers' money. Obviously, that has happened again here. In discussions with the chairman and the chief executive I pointed out that if there were such serious deficiencies in their design they had the legal responsibility to make them good. The figure, as I recall it, put on the deficiencies in the design and the delay those deficiencies caused to the company is in the region of £12.5 million which should be recoverable by legal action if necessary. I asked about this 12 months ago in the House. I want to know the result of the legal actions then being considered, if they have been taken, because that is a considerable amount of taxpayers' money which should not be in the pockets of people who do such a bad job on a large project such as this. The Minister can ponder those questions and give me the answers in his reply.

I am glad so much has been achieved in Irish Steel. It is our hope that the decision taken here is the right one and that the future for Irish Steel will be that they will have a chance to get round the corner. They have come a long way and we all hope to see them make it.

I would remind all Deputies that we have approximately 68 minutes to conclude all Stages of this Bill and eight Cork Deputies and Deputy Mac Giolla wish to contribute. I would like Deputies to bear this in mind. I would like to get in as many Deputies as possible.

Having tried to get in on the previous debate on public expenditure, I say that it is unfortunate that we are confined.

Deputy Reynolds has attempted to take a very balanced approach to the problem of Irish Steel and has raised serious questions about the wisdom of further investment in the industry. That must be balanced against the situation in which we in the Cork region find ourselves. Unemployment has increased there dramatically over the last couple of years, and any consideration of financial aid for any industry in the Cork region must be with this fact in mind. Some people who criticised the Bill when it was published and the decision to make a further investment of £89 million have ignored the major problem in the Cork region of unemployment. The Minister in his speech said, "The additional risk capital represented in the decision to introduce this Bill and allow Irish Steel a last chance is £5 million in current money terms." It is a small investment to help out a region that is in serious trouble. It is an act of faith in Irish Steel who by any standards have a remarkable plant that has met all its projections and all the targets set for them in recent years. This year again they will reach their own targets. It has been confirmed in the consultants' reports which the Minister and Deputy Reynolds referred to that the plant is the most efficient and modern of its type in the world.

Despite meeting all their projections, the company have one major drawback in their inability to sell what they produce because of the restrictive EEC quota system. At the present stage the mill could have customers but would be unable to provide their requirements because of the restrictive quota system. I will deal with that later.

Speaking as a Cork Deputy, I can say that the mill now has a third generation of families working in it. The decision made by the Government is an investment of confidence in the technical ability of the people in the mill. The mill should be profitable by 1986 at the latest. Critics of Irish Steel and of the Government's decision to make a further investment in them should bear in mind that the steel industry is in a difficult situation at present and it is a most complex industry to deal with. On reading the reports of successive chairpersons in recent years I was impressed by the reference to the high motivation of the staff working in Irish Steel. I know on a personal level the technical and administrative expertise in the plant at present and I admire the way in which the staff, especially the sales staff, have searched for markets in a very difficult situation in Europe. Critics of the Government's most recent decision in this matter should remember the spin-off effects for the Cork region. Irish Steel must be one of the major customers of the ESB. The steel plant has a major spin-off beneficial effect for companies such as CIE and also the port of Cork which has been experiencing hard times in recent years. The importation of scrap and the export of finished products has a most beneficial effect for the port of Cork. The export of finished products has a most beneficial effect on the economy in that it attracts a certain amount of foreign currency. I have commented already on the highly motivated work force in the plant, and I can only hope that the present investment will mean that the staff will work in as dedicated a way as they have in recent years and that this investment will not bring about a more complacent or lethargic attitude on the part of the workforce.

One expression of concern I have is contained in the chairman's most recent report concerning personnel. He says that the average level of absenteeism has increased from 6.9 in 1981-82 to 8.4 in 1982-83. I hope that that trend is reversed in the present year. In the last financial year the company because of their performance recovered much of the market here in Ireland and had a significant increase in their level of exports. In 1982 the workforce were forced to go on a three-day week. I am glad to say that that did not last too long and the company resumed normal working in late 1982 and had to introduce a third shift in 1983 to keep up with the demand for their products.

As I said, Deputy Reynolds has commented on the successive SOFRESID reports. The second and third reports quoted by the Minister outlined the basic underlying challenges facing the steel plant in the coming year. I will not quote them, but they are on record in the Minister's speech. One pleasant factor is that one of those SOFRESID reports says that the plant has a future. The second report has been vindicated by the company surpassing even the market projections made by the consultants for the year 1982-83. The company have, through expanding sales and increased productivity, managed to perform efficiently and have reduced the factors which were creating the losses that they experienced in recent years. The losses have been reduced dramatically over the last two to three years, as the Minister indicated in his speech. However, the company are faced with a major problem, that is the cost of energy. I will not deal with it at length because of the time factor.

Debate adjourned.