Dáil Éireann debate -
Tuesday, 28 May 1985

Vol. 358 No. 12

Private Members' Business. - Limerick Industries Project: Motion.

Mr. Reynolds

I move:

That Dáil Éireann condemns the Government for its decision to reject the Hyster Industry for Limerick and the surrounding area in view of the disastrous unemployment situation in that region.

The Coalition Government's decision in cutting a grant agreed already between the IDA and the Hyster Corporation by £1 million, resulting in the loss of 800 jobs for Limerick, was a monumental error of calculation and of commercial judgment. The miscalculation arose from the Government decision to reduce the grant in the mistaken belief that the Hyster Corporation would pay an additional £1 million for the privilege of setting up their project in Ireland when in fact better terms were available in Holland. The bad judgement arose from the fact that the project did represent good value for money and was a low risk project. When one examines statements made at the time it is clear that it was a low risk project. On 15 May the Minister said that, following negotiations between the IDA and the Hyster Corporation, the Government in June 1984 considered proposals for grant assistance for the project, that the proposals would be very expensive in terms of Exchequer cost and would have resulted in a very high grant cost per job. The Minister went on to say that there was considerable risk attaching to the project because its success depended to a large degree on the company's ability to establish themselves in a market for spare parts which up to then they had not serviced and in which there was considerable competition. The Minister stated also that the making of parts for other manufacturers' machinery was an inherently difficult business area in which there would be natural resistence to new entrants. Therefore, the Minister's opinion was a very considerable risk attached to the project.

Let us compare his statement with a statement issued by the IDA on the following day in which they said they were satisfied that the package recommended to the Government represented the best deal that could be negotiated with the company, that it represented good value for money and that the project as negotiated was soundly based. The fact that the company decided in the event to locate in another country is an indictment of the IDA view that the package was the minimum necessary to secure the project for Ireland. Here we had the IDA, an agency set up by the Government to make value judgments, disagreeing with the Minister in relation to the evaluation of the project.

In an interview with The Irish Times, the President of Hyster, Mr. Bill KilKenny, said, as reported in that paper on May 20, 1985:

...the spare parts project was not high risk as has been suggested by the Minister for Industry, Mr. Bruton, and that to suggest that it marked a new departure for Hyster was untrue.

It was a very serious matter for an international investor to have to put on public record the allegation that a statement made by the Minister was untrue. The report continued:

The Company, he said, saw the total project of providing spare parts for competitors equipments as being in two phases. Phase one, establishing a presence in the marketplace through buying-in components and selling through dealers in the US and Europe, "is active and has been profitable for quite some period of time." The lower risk second phase, manufacturing the components itself, was what had been offered to Ireland and rejected.

Though the Minister had said the project was high risk, the president of the company said that what had been offered to Ireland was the lower risk second phase which involved manufacturing components for a market that had been proved already.

Minister for Industry, Trade, Commerce and Tourism (Mr. J. Bruton)

I did not say what the Deputy is attributing to me.

Mr. Reynolds

I am quoting the statements that were made and I have not seen these statements contradicted anywhere since their publication.

Mr. G. Collins

Perhaps the statement was made by the Minister's handlers.

Mr. Carey

Why did Deputy Collins not lead off for Limerick?

An Ceann Comhairle

Each Deputy is entitled to make his contribution without interruption.

Mr. Reynolds

The Minister's statement was contradicted flatly, first by the IDA and then by the president of Hyster. Was the project good value for money? Was it a low risk project or was it, as the Minister claimed, a high risk project? It is quite clear that it was a low risk project and that it represented value for money. I trust, therefore, that the Minister will be able to tell us how he arrived at his judgment which was to the contrary.

If the Minister were to sit at the Cabinet table and undertake a simple cost-benefit analysis on the project he would find that to remove 800 people from the unemployment list would involve a net benefit to the Exchequer of £5 million. If that does not appeal to the Minister I can assure him that it appeals to the hard pressed taxpayers and that he will have difficulty convincing them of his justification for throwing away 800 jobs for the sake of £1 million. If the job had only lasted one year it would have netted the Exchequer £5 million and this is made up by way of a saving of £2.7 million in social welfare payments and in a net contribution, at the standard tax rate, of £2.2 million. It was a simple sum but obviously the Minister did not do it.

When this news broke the Government responded in a panicked hysterical fashion — excuse the pun — in an effort to cover up their disastrous error of judgment and in an attempt to mislead the general public the Minister for Industry, Trade, Commerce and Tourism and the Minister for Justice and the Taoiseach issued a succession of collaborating statements using selected financial statistics to a point bordering on the untruthful. That is a serious thing to say and I do not say it lightly.

I can only put on the record of the House what I understand to be the factual position of the grant agreement agreed between Hyster Corporation and the IDA. The structure is not unusual. It is very similar to that put forward in large scale multinational agreements. In my short time as Minister I had the experience of looking at projects and proposals like this one. I am quite certain my predecessors and the Minister had similar type proposals put before them. As I understand it, the proposal was a progressive investment one which was to include annual instalments of investment. I understand the proposed annual investment by the company and the State was something like this: year one, a grant approved of £902,000 and an investment by Hyster Corporation of £1 million; year two, a grant approved of approximately £2½ million with a corresponding investment from Hyster of £2½ million; at the end of year six a £7.9 million grant approval and an investment by Hyster of £8 million; at the end of year ten, a grant approxal of £10.7 million and an investment by Hyster of £10.6 million. Minister, they are, as I understand them, the true facts of the proposal that your Government rejected.

An Ceann Comhairle

The Deputy should address the chair. I know the Deputy has developed a style of his own.

Mr. Reynolds

And it is time I got out of the bad habit.

An Ceann Comhairle

It would be better if the Deputy did so.

Mr. Reynolds

I will try to get out of the habit.

Mr. G. Collins

Let us be courteous to the Ceann Comhairle and not group him with the crowd that made the mess.

Mr. Reynolds

Hyster's investment on an annual basis was to come from company profits, bank guarantees and other financial commitments. The Minister and many Members of the House are familiar with this kind of investment proposal. It is important that there are bank guarantees and financial commitments in place and that grants are paid only when the IDA are satisfied and when the company have complied with their legal obligations under an agreement to be entered into.

The Taoiseach, the Minister for Justice and the Minister for Industry, Trade, Commerce and Tourism would have had us believe that £14 million would be paid out the first day with an investment of £1 million from Hyster. They pulled back from that position later, when the panic had subsided, to a ratio of £11 million: £1 million. Anyone who knows anything about industrial investment projects or the manner in which the IDA operate would not attempt to tell the House or people that the IDA, operating under statute and within guidelines and criteria laid down for them, would attempt to put up a proposal on the basis of a ratio of 11:1. That is a totally misleading statement and it illbehoves the Minister with such a statement, backed by the Taoiseach and the Minister for Justice, to set out to undermine the credibility and professional integrity of the IDA.

For many years they have been recognised not only here but throughout the world as the most professional industrial development agency in the world. That compliment has been paid to them many times. Many countries have tried to copy their strategy and the successful manner in which they have brought international investment here since the sixties. It is despicable in the extreme for any politician to try to undermine their credibility with a statement such as that when dealing with an international company which had already set up in Ireland and whose bona fides was known to the Government. Surely the Minister was not unaware of the consequences of his statement and surely the Taoiseach was not unaware of the damage he would do to this organisation who time and again have successfully negotiated good investment projects. Where would we have been for the last 20 years if we did not have the IDA to bring in large scale investment? It was easy to come along and in order to protect their political scalps, to try to pass the buck and leave the IDA the pawn in a situation which demanded a little more integrity and statesmanship than that shown by the Taoiseach and the Ministers concerned. It was a sad reflection on the Minister.

Is that the truth of what happened? Let us look at what the sequence of events were more than likely. There were difficult and tough negotiations between the IDA and Hyster. I would be the last to say that Mr. Kilkenny, President of Hyster Corporation, ably abetted by his top management executive, is not the toughest negotiator I ever met. In the Sunday Independent he was classified as the best poker player in the world. I do not know if he is or not, but he does his job properly on behalf of his company. The IDA carry out their job just as efficiently and professionally on the other side of the table. Agreement was reached between them. In a situation such as this, which involves a large project and continuous negotiations, the Minister is kept informed of the likely outcome and if he is not satisfied with what he thinks that likely outcome will be he has an opportunity to consult his Government colleagues and get guidance on what State investment they would be happy to go along with. If that did not happen the Minister did not do the job properly. I may have the wrong Minister in the dock.

Mr. G. Collins

That could be true.

Mr. Reynolds

What I think happened is that the project was brought to the Government table by the Minister for Industry, Trade, Commerce and Tourism. Either he approved of the project in bringing it to Government or he did not. If he did not, why did he bring it to Government? I believe he approved of it but, having brought it to the Cabinet table, he found arraigned against him one or two of the senior members of Government, whatever way one wants to count seniority. I do not know how they do it.

Another factor came into play and that is that it is now an established fact that a former economic adviser to the Taoiseach in the period 1974-1977 and 1981-1982 was appointed by the Government as a director of the IDA. He quarrelled with the credibility of this project at the IDA authority level. He lost out there and the IDA approved the project to the Government. He went behind their backs to his political masters and urged the Taoiseach and Minister of Finance that Ireland was paying too much for international projects and that they could be got cheaper. The result was the Taoiseach and the Minister for Finance decided against the Minister for Industry, Trade, Commerce and Tourism and decided that the IDA should tell Hyster they were happy to accept the project provided Hyster would up their £1 million initial investment. If the Taoiseach and the members of the Government believed this was a high risk project and was too expensive it was their prerogative to refuse the investment. However, the Minister should not con the people into believing that it was too expensive or too high a risk to be taken on board and then say they would accept it with all its warts if Hyster would put up a further sum of £1 million. The Minister lost at the Cabinet table because the Taoiseach and the Minister for Finance accepted the opinions of economists who are responsible to nobody, who do not go into the public arena looking for investment, who make judgments from a sheltered viewpoint and yet can tell everybody how to run his business. The Minister gambled and lost. It was probably not the Minister's decision and he is not the one who should be here this evening.

It is well know that the Department of Finance and certain economists believe that we are paying too much for international investment. If that is the Minister's decision, let him say so in a policy document instead of ruining the credibility of the IDA and spoiling their efforts to try to bring investment here. It is obvious that the Minister accepted the view of one economist to knock this project for the sake of a sum of £1 million. I am sure that the IDA knew, as I know having negotiated with them, that the Minister had not a pup's chance of getting the project back on the rails. There were already better terms available in Holland and the Minister asked Hyster, who had already brought a very significant project into Blanchardstown, a company who had lived up to all their responsibilities here, to put up a further £1 million. That conclusively shows that the Minister is totally incompetent in assessing commercial judgment. It was a calculated risk going back to Hyster and the Minister lost.

I have already stated the facts of the proposal before the Minister. State funding is never paid out in the first year of investment but in annual payments and if the company do not match their investment, the State grant is not paid. I can only come to the conclusion that using their own selective statistics of £11 million funding to the sum of £1 million from Hyster, was a deliberate propaganda ploy by the Government to undermine and discredit the expertise and commercial judgment of the IDA. It was to bolster flagging public confidence in the Government, to show that they could effectively manage the country's affairs and that they were in a position to tackle the unemployment crisis. The Minister knows very well that it was within the criteria and guidelines of the IDA, that it was not a high risk operation and that it was value for money.

If the Minister had not accepted the project at the very beginning, there would have been some credibility in his stand. There is no credibility in saying that he would have accepted it if Hyster had put up a further sum of £1 million. On a close analysis of the facts, any normal person would conclude that the Minister made a miscalculation and that the commercial judgment within the Cabinet is nil. Indeed, it is also dangerous when it results in losing good projects like this. I challenge the Minister to give us all the facts. For the first time in the history of Government Ministers, Deputy Bruton destroyed the confidentiality of negotiations between the IDA and a commercial concern for political ends and the repercussions will be felt for many a long day. Having selectively broken confidentiality, the Minister then took the ratio of £1 million to £11 million or £1 million to £14 million. I ask him to fill the gaps and to let everybody make his own judgment as to the facts.

It is not the first project which has been lost. The week before, a canning plant for Guinness's Brewery went to Belfast providing jobs for 270 people. At the press conference in Belfast, it was clearly stated that they were delighted to wrestle it from the Republic. The Minister should spell out his policy and if he does not want any more international investment here he should say so. However, the Minister and the Government should know that we will need large scale international investment for quite a long time to come and we are failing to capitalise on the benefits of the large scale investment which has gone on here for many years. Under successive Fianna Fáil Governments, very large industrial projects were brought in and are still in place with many spin-off benefits. The black hole in the economy is a clear indication that we are not capitalising on the benefits of large scale investment. We have succeeded only to a very limited degree — about 20 per cent — in supplying the services, components and the needs of large scale investors and that is why the black hole exists. There is also lack of confidence for further investment here.

The Minister's disastrous decision in relation to Hyster cost the Limerick region 800 jobs. The IDA own the factory and it is lying idle. The Minister took two selective figures, one at each end of the spectrum, and misled the people of Limerick and his own backbenchers in the area. I cannot understand how he misled the Minister for Justice if he can read figures and I do not know if he can. How did he let that happen to his own region? It did not happen when Fianna Fáil were in office and it will not happen as far as they are concerned in the future.

In The Irish Times of 20 May 1985 the Taoiseach said that the decision to seek additional investment from Hyster was one shared by this whole Government. While denying that Deputy Bruton's statement last Friday undermined the credibility of the IDA he said that one thing that was never made clear is that the Government make policies and the IDA execute them. He also said — wait for it — he was afraid that over a long period of time the Government have abdicated their functions and that Ministers have not carried out their functions in determining the policies which should operate, under what circumstances grants should be given and the kind of input which is needed by a firm coming in here. He went on to say that they had to exercise their responsibilities in Government, that they were acting responsibly and that the IDA had to accept that.

The first criterion for any Minister in Government is to respect confidentiality between a firm negotiating a package and the IDA. The Minister has broken that confidentiality and he has also misled everyone by saying that former Governments did not carry out their duties and responsibilities in relation to the Irish taxpayer. The Government must have very short memories. The Minister for Justice must have a short memory and the Taoiseach must have a short memory, but this is what we have come to expect from him in his continuing propaganda exercise in relation to this disastrous decision. It is dishonest for any Taoiseach to say previous Governments did not carry out their responsibilities. He should remember that the Government of the day did not take on board the De Lorean project. I am not in a position to know if the Learfan jet was offered to the IDA — perhaps the Minister knows and will tell us. He should look at the history of different Ministers and then try to convince us that this is the only Government which turned down IDA projects. Instead he continues to make these propaganda statements using his Ministers and many well known sources——

Mr. G. Collins

The handlers.

Mr. Reynolds

I did not say the handlers. Another gentleman was piqued because he did not get his way in the IDA and ran to his political masters——

Mr. G. Collins

He is still a handler.

Mr. Reynolds

He chose to give out information and challenged the basis of the Hyster project in Blanchardstown. Perhaps the Minister will tell us what the average cost of these 800 jobs in Limerick would have been. Tell me if the facts I have given are wrong. It is not good enough for him to stand up and say I am wrong while hiding behind the seal of confidentiality, because he has already broken this seal. It is time for him to be honest. I do not believe he is responsible. I believe the Minister for Finance and the Taoiseach are responsible. The Minister for Industry, Trade, Commerce and Tourism was sent out to defend the indefensible. When these statements are read one after the other, it can be clearly seen that the Minister put his foot in it when he said that the project was so expensive he would not take it for an additional £1 million. All this panic and hysteria can be seen when one reads these statements.

Where does the Minister for Justice fit in? I understand he was in Limerick when the bad news broke but he refused, as he consistently refused, to accept any bad news. We all know where he wants to go. As I said, he refused point blank to make statements on this matter and he said to his Cabinet colleague that, as the Minister responsible for this area, Deputy John Bruton must issue a statement. Perhaps the Minister had to be persuaded to make that statement or perhaps he was pushed, I do not know, but he stepped into the breach to defend the indefensible.

The Minister issued a statement on Thursday night, and on Friday morning I read the IDA's statement which clearly showed their total dissatisfaction with the Minister's statement. I understand that the chief executive of the IDA contacted him, told him about the genuine concern of the authority as regards their credibility, professional expertise and future negotiating practices. They told him the damage that had been done and said they would have to put the record straight. The Minister, according to Press reports, said he accepted that position and told them to issue their statement, which they did. It was unparalleled in the history of the country for the IDA to make a statement clearly rebutting what the Minister said the day before, and backed up fully by Mr. Kilkenny and the Hyster Corporation in their statements to The Irish Times. The Minister has an obligation to people of Limerick, to the nation and to this House to admit he has made a faux pas, to admit that the calculated risk taken by the Government at the behest of an economist who does not know what real commercial life is like, who never went abroad to negotiate anything, who does not know how to play the odds and make a value judgment——

Mr. G. Collins

He never had to live on the dole.

Mr. Reynolds

That is for certain. During the last few days that man tried to pour cold water on the Hyster project at Blanchardstown. I was proud to have been associated with that project in 1982 as are the IDA. That man has tried to discredit that business project and is trying to mislead the public into believing that the money to be paid by the State, if that project is successful, will be paid on day one, but that does not happen. I am not breaking the seal of confidentiality when I say that the Hyster project was structured in such a way that the low risk investment — training grants, research and development grants and so on— would be paid in the first phase of five years, and after that period there would be a full appraisal. If the project is successful we will have protected the taxpayers against a heavy State pay out on the second half of the project, when it went into production, and enormous capital grants would be involved — we all recognise that we are ably assisted by the EC as regards training grants.

The Hyster project at Blanchardstown was a calculated judgment by the IDA and the Government of which I was proud to be a member. I have little doubt that the same situation applied in this case, and at any stage along the way the IDA could have decided to cut their risks, not a 14 to one ratio or an 11 to one ratio, but a good project which could have been secured if the Government knew their business. Over the last two and a half years they have clearly demonstrated that they do not know their business. They lost a project to Belfast last week but how many more miscalculations were made in the chambers of power which we do not know anything about? Is it any wonder that the people ask if the day will ever come when the Government tackle the unemployment crisis which confronts us? Are the Government bereft of ideas and confidence to do the job they were elected to do?

I honestly believe the Minister was caught in a vice. He was sent out to defend the indefensible. I believe the Minister for Finance has reflected the true voice of the Department of Finance that Ireland could secure projects at a lower price. He is the man who wielded the axe in Limerick, aided and abetted by the Taoiseach, who was badly advised by an economist who has been advising him for far too long. The country is paying a very dear price for that advice and, worse still, for the acceptance of the kind of advice which created the present disastrous unemployment situation.

The Minister would be better off if he had made that £1 million investment rather than sending a Minister to Cork yesterday in an attempt to turn the tide by trying to convince the people that the Government will make a £60 million investment down there. If the Government had spent £1 million in Limerick that would have brought them a great deal more credit and more real jobs. This would have given the people some confidence in the Government to do the job they were elected to do. The Minister should not berate the House any more. He should give us the true facts. I cannot accept that the Minister will hide behind the excuse of confidentiality because the seal of confidentiality has been broken. Put the facts on the floor of this House and stop this misleading propaganda which could blow up in his face, because the unemployment crisis is a time bomb. No amount of misleading propaganda or complaints in the economic world will convince the people that things are different.

Mr. Gene Fitzgerald

Change the handlers.

An Leas-Cheann Comhairle

The Minister has 20 minutes in which to speak to his amendment.

Minister for Industry, Trade, Commerce and Tourism (Mr. J. Bruton)

I move amendment No. 1:

To delete all the words after "Dáil Éireann" and substitute the following:

Recognises the right of the Government, pursuant to Section 42 of the Industrial Development Act, 1969, (as amended by Section 3, 1975; Section 6, 1978 and Section 3, 1981 Acts) to approve grants in excess of £2.5 million and endorses the policies being pursued by the Minister and the Government in line with the White Paper on Industrial Policy and in the National Plan—Building on Reality— in order to promote investment and create the economic and financial conditions in which sustainable new employment can be created throughout the country, including the Limerick area.”

The Industrial Development Acts empower the Government, in respect of particular industrial undertakings, to permit the making of a grant or grants in excess of certain statutory grant limits imposed on the IDA. This provision does not in any way conflict with the autonomy and independence of the Industrial Development Authority. What is clearly intended by the Legislature — and much of this legislation was passed when Government other than mine were in office.

Mr. Reynolds

Sure.

Mr. J. Bruton

What is clearly intended is that the Government should have a deciding role in those industrial projects which involve considerable investment of Exchequer funds. This intention of the House could not be reflected by a mere rubber stamping process, which would of course be the case if the Acts did not allow any response from Government other than straightforward approval. The effect of the exercise of this power, therefore, is not to undermine the Authority's position, but rather to indicate that the Authority operates within parameters established by the Government in their policy making role. It is for the Government to make these decisions and for the Government to account for them by their statements here and elsewhere.

As long as I have been Minister for Industry, any proposal coming to me from the IDA where the Government's responsibility was to approve it has been subjected to the most rigorous examination by me and by my Department. For Deputy Reynolds to infer that in some way for the Government to reject a proposal put forward by the IDA is to undermine the IDA is, of course, to undermine the whole purpose of the legislation.

Mr. Reynolds

No, it is to make a public statement about it.

Mr. J. Bruton

The legislation clearly envisages that there will be circumstances in which the Government may, if they so decide it to be right, not approve a particular proposal coming forward from the IDA.

(Interruptions.)

Mr. J. Bruton

If the Government were to put a rubber stamp on the proposals, the Statute Book would have said so. Certainly as long as I am Minister here I intend, where I think it correct, to reject and recommend the rejection of any IDA proposals that I — not the IDA — and that the Government do not feel is correct.

Mr. Reynolds

Did the Minister recommend the rejection?

Mr. J. Bruton

That is something that I shall continue to do whether it is condemned or criticised here in this House or elsewhere, or whether people elsewhere are peeved or upset at decisions I take. These decisions will be taken.

Mr. Reynolds

The Minister knows nothing about international business.

Mr. J. Bruton

These decisions will be taken responsibly as the legislation requires me to take them in my responsibility to this House——

Mr. Reynolds

The Minister made a mess of it.

Mr. J. Bruton

——as a Minister appointed by it.

Briefly, the background to this subject is that, following on negotiations between the IDA and the Hyster Corporation of Portland, Oregon, USA, the Government in June 1984 considered proposals for grant assistance for an "all makes parts" venture to manufacture a wide range of parts for forklift trucks and other handling equipment, to be located at the Annacotty Industrial Estate, Limerick. The Government decided that the project relative to the risks and the cash contribution of the company, was very expensive to the taxpayer in cost per job. Hyster's upfront initial contribution of only £1 million, when compared with a possible total State expenditure on the project of up to £14 million, seemed very disproportionate and would have exposed the State to an unacceptably high degree of risk if the project had failed. It would, conversely, have made the abandonment of the project by Hyster financially easier than was prudent from our point of view — that is, the point of view of the State.

Mr. Reynolds

That is some use of words.

Mr. J. Bruton

I would like to elaborate here on the disparity between the proposed State exposure versus the company cash contribution involved. While the total State exposure involved could have run to £14 million if the project ran its course, naturally, as in the case of all such projects, all of these moneys would not have been going in in the first year of the project. Rather, the State money would be paid out over a period of time as the project progressed. Nevertheless, the State was being asked to guarantee a provision of up to £14 million of taxpayers' money should the project progress suitably, whereas the company were guaranteeing——

Mr. Reynolds

No bank guarantees?

Mr. J. Bruton

——an input of nothing more than £1 million cash upfront, anything else from the company to come from retained earnings, if such earnings materalised. Let me repeat that point in case anyone is under misapprehension. The only cash contribution coming from the company was £1 million. Any other money that they were going to put in later would have come solely from retained earnings from this project. If those earnings were not made——

Mr. Reynolds

That would not be money at all.

An Leas-Cheann Comhairle

Deputy Reynolds, please.

Mr. J. Bruton

Many companies do reasonably well but do not make the profits that they initially envisaged.

(Interruptions.)

An Leas-Cheann Comhairle

Deputy Reynolds, you were allowed to contribute for 40 minutes without interruption.

Mr. Reynolds

I was not.

An Leas-Cheann Comhairle

You were while I was here.

Mr. Reynolds

I was interrupted before the Leas-Cheann Comhairle came in. I was interrupted five times during my contribution.

An Leas-Cheann Comhairle

You have interrupted three times already.

Mr. Reynolds

I am making only one interruption here to say that any contribution coming from a company is money, irrespective of whether that company may have bank guarantees or may not have.

An Leas-Cheann Comhairle

The Minister, to continue, please.

Mr. Reynolds

That is the point that I want to make.

Mr. J. Bruton

Deputy Reynolds did not interrupt five times. He is interrupting on an on-going, continuing basis.

Mr. Reynolds

The Minister should now go ahead and read out the facts, produce the document.

Mr. J. Bruton

The position is, if I may repeat this because there was an amount of sound off-stage while I was speaking, that the only cash contribution coming in from the company was £1 million initially. Any subsequent moneys coming in from them to match hard cash coming from the Government in grants were going to be in the form of retained earnings. If they did not make those earnings they would not and could not put in the money, even though the project might be making, say, 1p profit per year.

Mr. Reynolds

What about phase one in the States?

Mr. J. Bruton

They could not put in any profit more than 1p because they would not have retained profits of more than that. However, the Government were still committed as far as their contribution was concerned. I do not believe that that is a good situation. In most industrial projects the position is that the company are buying their own site, they own the factory.

(Interruptions.)

An Leas-Cheann Comhairle

Deputy Reynolds, please.

Mr. J. Bruton

The company are contributing all those assets to the project, whereas in this case it was merely a rented premises. Companies usually would be tied into the project but that, unfortunately, in not the way it was in this case, because of the fact that there was only £1 million coming up front from the company. For instance, by the end of year three of the project the State would have invested over £7 million of Exchequer funds in the project as against only £1 million cash from the company, plus a possible additional company contribution from retained earnings in the event that the project would be earning profits by that time; and who can guarantee that they would have earned profits? No-one can guarantee that in the commercial world of which Deputy Reynolds speaks so eloquently. Nobody can guarantee that you will make profits in such a situation.

Mr. Reynolds

The Minister's statement is an insult to this House.

An Leas-Cheann Comhairle

Order, please.

Mr. G. Collins

What did the Minister think the company were coming for? They were coming following on the national plan.

An Leas-Cheann Comhairle

Deputies, would you allow the Minister to continue without interruption?

Mr. Reynolds

It is very hard to take.

An Leas-Cheann Comhairle

Have respect for the House. You are being very unruly.

Mr. J. Bruton

This type of high State front-end exposure, without equivalent equity contributions from the company, was considered by the Government to involve a considerable degree of risk for Exchequer funds.

In addition to this, it was recognised that there was a further significant risk factor attaching to the project in so far as its success would depend to a large degree on the company's ability to establish themselves in the "all makes" spare parts market, which they had not hitherto serviced and in which they could be expected to encounter considerable competition. In view of the high cost and the relative degree of risk attached to the project, the Government was concerned that in the proposal put to it the Exchequer was being asked to contribute a disproportionately large share of the financing requirements, compared to the contribution that the promoters themselves were prepared to make. In all these circumstances, the Government indicated to the IDA that they would be prepared to approve grant assistance for the project only on the basis of an increased up front cash contribution from the company as evidence of their confidence in the project's success. In so deciding, the Government recognised that there was a risk that the project might not proceed. However, the Government considered that, in view of the high Exchequer cost and the disproportionately high degree of risk that the State was being asked to bear, such an approach was totally justified.

At that point I might correct one point that Deputy Reynolds made. There was no offer on the table from the Netherlands at that time. That was subsequently negotiated by Hyster.

Mr. Reynolds

That is contradicted by Mr. Kilkenny in his interview with The Irish Times.

Mr. J. Bruton

The negotiations conducted between Hyster and the IDA were conducted on the understanding that the negotiations were being exclusively conducted with the IDA and with no other authority up to that point.

As a result of the Government's consideration of the matter, the promoters were asked to put in an additional £1 million equity contribution but they declined. Any project involving as much State finances when compared with such a low amount of the promoter's initial cash involved deserves to be considered most carefully from the Exchequer's point of view. The company expected to recover their investment in less than four years while the State would have had to wait at least twice as long to recover its investment. Furthermore, if the project failed to achieve its targets, the company stood to lose very little compared to the significant State exposure involved, for example, £7 million after only three years.

Apart from this clear financial risk there were the considerable commercial risks attached to the project. It has to be borne in mind that the making of parts for other manufacturers' machinery is an inherently difficult business area. For example, Hyster could guarantee only a minority share of the use of the plant's output in 1987. Furthermore, some lift trucks have a very short working life and the advent of low-cost standardised trucks could in time reduce the demand for replacement parts. Added to all this was the fact that Hyster were entering a market of "all makes" spare parts which it had not hitherto serviced and in which there would be considerable competition.

Mr. G. Collins

Nonsense. The project was recommended by the IDA, not by a bunch of amateurs.

Mr. J. Bruton

Apart from the question of the financial and commercial risks involved in this project, the Government also had to consider the likely number of jobs to be created by the project and the very high grant cost of those jobs involved. Although the figure of 800 jobs has been much touted in the past few days, in fact nothing near that figure would have been created in the early years of the project. Deputy Reynolds' calculation was based on the assumption of 800 jobs in one year. His argument does not stand up because that number of jobs would not have been achieved until the tenth year, that is, if everything went according to plan.

The employment content was envisaged to extend gradually, with less than 80 jobs in the first two years and it was not until the tenth year of the project that the planned maximum number would be attained. For instance, after three years only 140 jobs were planned and only 287 jobs after six years. Accordingly, the "800 jobs approximately" figure which has been repeatedly mentioned was dependent on the project being an outright success and completely meeting its job targets which were projected ten years into the future. Whether or not this would have happened is debatable given the high financial and commercial risk involved. I already made reference to these job fall-out figures in my RTE television interview on 17 May 1985. The Government have to be very conscious of the value for money involved in all proposals put before them and there is no doubt that with less than 80 jobs envisaged by the end of year two of the project, the grant cost per job from this project was running high.

Apart from these considerations, a number of other areas have been touched on in the media by Deputies and by political commentators over the past few days which need some clarification. There have been comments by some commentators on the relations between the Government and the IDA in this matter. The IDA statement clearly indicated that they fully recognised the Government's right not to accept IDA recommendations on major projects. Above a certain figure, IDA grants require Government approval. The present Government, since they came into office, have examined a number of this type of cases very carefully, often involving considerable exchanges with the IDA. Let me make this clear for Deputy Reynolds. The Government are not involved in the negotiations of the IDA. It is only, when they have completed their negotiations and when a project is presented to the Government that there is a dialogue about the project to establish if it is good value for money.

Mr. Reynolds

Not in my time.

Mr. J. Bruton

In my view, for the Government to be involved on a day-to-day basis with the negotiation of individual projects would be to dilute the independence of the IDA. They are there to negotiate and to come up with a package and it is the job of the Government to say yes or no. It is not the job of the Government to arrogate to themselves the functions of the IDA, as Deputy Reynolds appears to want, and to sit in on negotiations regarding particular projects. If that were to be the case, where would it end? We would have no IDA but we would have the Government doing all the negotiations.

Mr. Reynolds

Is that why the Minister is a failure?

An Leas-Cheann Comhairle

Will the Deputy please allow the Minister continue without interuption?

Mr. J. Bruton

In the case of the Hyster project the Government exercised their judgment and came to the conclusion that the contribution from the company was so light as to be considerably disproportionate to the risk involved for the State. It must be clearly understood that in such, cases it is the Government who make decisions. The IDA negotiate with the industrialist but the Government ultimately decide. The Dáil gave the Government the power and the responsibility to approve grants over a certain figure, because beyond that figure the Dáil considered that it should be a matter for the Government to assess. Everybody who negotiates with the IDA knows that if the grant involved is beyond a certain figure, then the Government's agreement must be sought. The Government have a right to suggest changing the terms proposed if they think it desirable. Everybody negotiates on that basis and the IDA statement confirms their clear understanding and acceptance of that situation. In effect, what all this entails is a clear scenario whereby the Government make policy and the IDA execute that policy.

Another area which has elicited mistaken comment is the suggestion that the project involved the making of spare parts of their own forklift trucks which are on sale all over the world and that a captive market, therefore, existed for Hyster to service. In fact, the project was mainly concerned with the making of spare parts for other people's machines, as well as Hyster's own machines, and this is clearly a very difficult market in which to win sales.

Mr. Reynolds

Read Mr. Kilhenry's statement.

Mr. J. Bruton

People who have machines tend to buy spare parts from those from whom they bought these machines and the original seller will want to pick up any spare parts business going for his own machines. What Hyster proposed to do, therefore, was to try and break in and take this business away from the original equipment suppliers and existing suppliers of replacement parts. Now, no matter how good your product and your marketing, that is a very difficult thing to achieve and a considerable element of commercial risk was, therefore, attaching to the project. Given this risk and the recognition of the fact that the company would be trying to break into a new market taking business of existing suppliers, the Government felt justified in seeking an additional £1 million.

At the end of the day, it has to be remembered that while the Government have a responsibility to try to attract new projects to create new jobs for this country, we also have a wider responsibility to the taxpayer. At the time the Government took the Hyster decision, it was preparing the national plan. The national plan subsequently clearly indicated what money was going to be available to the IDA over the next three years for industrial promotion.

Mr. G. Collins

The Government are throwing £60 million into a bridge.

An Leas-Cheann Comhairle

Will Deputy Collins please allow the Minister to continue without interruption?

Mr. J. Bruton

At the time this project was being considered, the IDA did not have these figures and while supplementary budgets may have provided additional funds for the IDA in past years, there was not to be a prospect of this during period when the Hyster project would have been unfolding, although again the IDA would not and could not have known this. For the first time, the Government set out in the national plan clear cash limits for all organisations, including the IDA. The IDA were not aware of these cash limits when they made their assessment whereas the Government were aware when they made their decision. That is the difference between a Government and a subsidiary agency. The Government have to look at the bigger picture of overall resources and cash limits, whereas the subsidiary agency merely has to act as best it can within its more limited mission. The Government had to judge the project, which contained liabilities for the taxpayer down the line over a number of years, in the light of what they knew, but what the IDA did not know, was going to be available in money terms under the national plan.

I should like to make some general comments in relation to overall policy considerations as they relate to this debate.

Mr. Flynn

Page 8 should be read first.

Mr. J. Bruton

I prefer to make my own speeches, really.

Mr. G. Collins

I think the Minister needs a handler. I thought he could do without one.

(Interruptions.)

An Leas-Cheann Comhairle

The Minister without interruption, please.

Mr. J. Bruton

I will say this — and I am sure a number of Deputies over there will agree with me — that you could not find better people to assist you than the officials of the Department of Industry, Trade, Commerce and Tourism. They will keep you on the right lines all the time.

Mr. Flynn

The handlers missed page 8 anyway.

Mr. J. Bruton

Although they are making a big song and dance about this issue Deputies opposite know that we have done something quite important as far as this decision is concerned. They are secretly glad that we have done this because they know that, by this decision, the Government have clearly established that it is the Government who determine industrial policy——

(Interruptions.)

Mr. J. Bruton

That is something we have established. I am sure Deputies opposite will be quietly pleased about this when they go away from this debate and reflect on it, that it has been clearly established that as far as industrial policy is concerned, the ultimate decision-making power is in this House to be taken by Ministers responsible to this House and in taking this decision we are clearly and in the most——

Mr. Reynolds

One would think there was nobody there before the Minister. Is the Minister the first Minister who ever stood in this House?

Mr. J. Bruton

There was no case before ever on record where the Government ever rejected an IDA project——

Mr. Reynolds

What about De Lorean?

Mr. J. Bruton

On all previous occasions it was either the IDA who changed their policy——

(Interruptions.)

An Leas-Cheann Comhairle

Order, Deputies please, allow the Minister to conclude.

Mr. J. Bruton

——or the Government accepted whatever the recommendation might be. That is not a good situation to have obtaining. It is important that the Government should show that they can and will, where they consider it wise, have the courage to take the necessary decisions themselves.

Mr. Flynn

If Hyster had put up the extra £1 million would the Minister have gone ahead? That is the burning question.

Mr. Reynolds

Of course the Minister would.

Mr. J. Bruton

Of course we would have gone ahead because——

(Interruptions.)

An Leas-Cheann Comhairle

Deputies, please, would you allow the Minister to conclude his speech?

Mr. J. Bruton

——had Hyster put up the additional £1 million that would have demonstrated first of all, that they were prepared to put in far more of their own hard money, twice as much in fact, of their hard money into this project than they were prepared to do initially. Let us remember that this is a private enterprise project, that the people who will be getting the profits from it had the confidence to put more of their own money, hard money, down on the floor to make sure the thing worked, not putting in money in the form of retained earnings in the future, if those earnings arose. Therefore, of course if they had put in an additional £1 million we would have been happy to have approved the project because that would have demonstrated that the people who were running it ——

Mr. Reynolds

And guarantee it ——

Mr. J. Bruton

——the people who were going to make profits from it, the people who would research the market had more confidence in it than was obvious from the fact that they put in only £1 million in the first place.

(Interruptions.)

An Leas-Cheann Comhairle

Deputies, please.

Mr. J. Bruton

That was a very sensible approach to this project and one which I believe will be seen even by Deputies opposite — when they calm down, stop shouting and start thinking about the issue — to have been a good decision from a national point of view.

Mr. Calleary

Will the Minister do it now with regard to that project in Mayo for me?

Minister of State at the Department of Industry, Trade, Commerce and Tourism (Mr. E. Collins)

I never heard such a despicable chorus of interruptions in the House in all my life.

Mr. J. Bruton

"Despicable" is being a bit hard on them. We have to appreciate that they were sent in here to do this job. Remember they are hoping that it will get great coverage in the papers and that is will more or less win them some marks in a limited area of the country to carry on in this fashion. I do not think that Deputy Reynolds, Deputy Gerry Collins, Deputy Flynn, Deputy Daly and Deputy Gene Fitzgerald, all of whom have served in Cabinet, who know that ultimately it must be the Cabinet who take responsibility for decisions, are in any way unhappy with what has happened——

(Interruptions.)

An Leas-Cheann Comhairle

Order, please, Deputies.

Mr. J. Bruton

——because they are glad that the Government in this instance have established that they will take decisions on questions. For all the volume — I talk in terms of decibels — from the other side of the House on this issue, there is very little conviction to match those decibels as far as this is concerned.

Mr. Flynn

We never strangled or muzzled the IDA.

(Interruptions.)

Mr. J. Bruton

The Government are very much convinced of the continuing importance of foreign investment in this country. I am glad to say that since we have come into office we have been successful, in conjunction with the IDA, in negotiating a large number of new projects in this country, providing substantial numbers of jobs, based on the concept of value for money. We now have over 80,000 people employed, representing 36 per cent of our manufacturing employment, in foreign industry, producing £5 billion worth of goods a year. We have launched a programme in the form of a linkage programme to get more of those foreign companies to buy more of their goods here so that foreign companies will not be an isolated entity within our economy but rather an integrated part of the total economy, contributing to its general health, rather than simply repatriating profits to their principals.

The national plan and the Government White Paper clearly underline that message. But where the White Paper marks a departure from previous policy is that we see that perhaps in the past incentives had been unduly tailored to the needs of foreign investment and mobile international investment, that we had been neglecting the potential of the small business here, that the incentives which were suitable to somebody from Oregon or Japan coming in here were not necessarily suited to an Irish person wanting to expand his business or to a person wanting to set up business who was a native of this country, that Irish business very often needed not big capital grants — because they already had premises — but assistance with marketing their product or with buying in new technology. That is why the Government White Paper containes a shift in the emphasis of policy, not to the detriment of foreign investment, but moving to have a more integrated package which contained an adequate provision for marketing and technology acquisition grants which are not exclusively available to home industry but more suited to home industries needs rather than the capital grant type of project which tended to be largely, though not exclusively, of interest to foreign investors. That is a valuable shift in our investment policy which puts more faith in what our people can do without at the same time expressing any lack of faith in the importance of the contribution of foreign investment to this country.

I would like to say to the House that there has been a considerable improvement in the investment climate as far as this country is concerned in recent times. I have just returned from an IDA promotion in Germany and in Britain. I was in both countries about a year ago meeting industrialists there.

Mr. Gene Fitzgerald

Where are the jobs?

Mr. J. Bruton

I will tell the House that I have noticed a very considerable difference in the attitude of investors in Ireland, where two years ago, or a year ago one was meeting people who were already in this country, trying to massage them, encourage them to remain here and not complain too much about the problems in the telephone service, of inflation and so on, when one was essentially engaged in a holding operation, on this most recent occasion all of the people whom the IDA arranged for me to meet, with very few exceptions, were new projects on the brink of coming in here, thinking about whether or not they would do so, hoping that they would be able to do so, a much more expansive atmosphere. Whereas two years ago one was engaged in a holding operation, an operation of limitation, so to speak, at present, thanks to the professionalism of the IDA — and I have no hesitation in commending the professionalism of the staff of that organisation in their work in bringing investment to this country; they are a very good organisation and do a very good job — and thanks also to the successful policies of this Government, which have brought down inflation to 6 per cent, there are much more positive attractions for foreign and domestic investment here. I know that in the years ahead we will reap the benefits of this.

(Interruptions.)

An Leas-Cheann Comhairle

We must have order in the House. Members are becoming very disorderly.

Mr. O'Dea

As a Member representing the constituency where the project was to be located I was shocked and appalled at the tone of the Minister's reply. In the last 30 minutes I listened to a speech of more than 5,000 words from him explaining why the Government overruled the IDA in regard to this project. The reality is that for a sum of £1 million the Government would have accepted the project. For a paltry £1 million, less than the cost of the Kerry baby tribunal, that project would have been based in Limerick and, ultimately, 800 jobs created. Since I was elected to this House I have contributed to many debates and to most of them I was able to bring objectivity and a certain detachment but I cannot do that in this debate because it is my people, my neighbours and friends whose morale has been crushed by the facts that led to this debate. This debacle must not be seen in isolation but in the general context of the Government's policy towards the Limerick and the mid-west region in the last three years. In that time there has been a considerable economic and industrial decline in that region. I could refer to industries like Mattersons and Ranks which were the mainstay of generations of Limerick people or about more modern industries such as Burlington which is being moved lock, stock and barrel to Tralee. Even the more modern technological industries set up in the area in recent times have not been immune, as the example of Atari shows.

We had many closures of small concerns, industries that did not hit the headline but they affected us much more than some of the industries that hit the headlines. The facts of the case are not that the Government were supposed to put up £14 million to Hyster's £1 million. The facts presented by the Minister are distorted and deliberately designed to confuse and mislead. The Hyster Corporation had to put up £1 million up front immediately while the Government were to phase in their investment of £14 million over the eight to ten years it would have taken the project to realise its full job potential of 800 jobs. The £1 million was not the only direct investment the Hyster Corporation had to make. There was a clear agreement that Hyster would invest a substantial portion of its retained profits back into the Irish economy. Listening to the Minister, Deputy Bruton, one would get the impression that it was his belief that retained profits do not constitute money. I cannot see the logic of that argument and I am sure that in the local elections the people of Limerick will demonstrate that they cannot see it.

The return to the Exchequer was mentioned in passing by Deputy Reynolds. It would be impossible for us to calculate how long it would take the total capital outlay by the Government to have been returned to the Exchequer by way of PAYE and PRSI. It would depend on how quickly the jobs were created which, in turn, would depend on how well the business progressed. I should like to point out to Deputy Carey who has been interrupting in this debate that his experience in relation to the chipboard factory in Scarriff, and other factories in his constituency, has not been too successful.

Mr. Carey

I know all about them and about multinational corporations and the start-up costs.

Mr. O'Dea

From what I have heard from Clare the Deputy will have cause to know about them. Economists I have consulted have told me that at the very best. Government expenditure could have been recouped through PRSI and PAYE within two years, and, at the very worst, within three years. That does not take account of the returns to the Exchequer that would come through an increase in VAT and excise duty arising from an increase in demand the newly employed people would create in the economy. It is not possible to count the returns to the Exchequer from the increase in business and personal income as a result of the spin off effects of Hyster.

The Government's initial explanation did not take account of the fact that their investment would be phased in over a number of years. That means — the Minister did not seem to understand the implications of this — that the biggest proportion of the money which had to be put up by the State, directly and indirectly, would be invested at a time when it was substantially less valuable than it is now because of inflation. The Government's statement did not take any account of the commitment by Hyster to reinvest a substantial portion of the retained profits into the Irish economy. The Government's statement, or their figures, did not take account of the fact that some of the £14 million, £11 million or whatever the sum is — Government spokesmen quoted different figures — would not constitute any net cost to the Exchequer.

Part of the £14 million was to come by way of the factory being let rent free to the Hyster Corporation. I am familiar with that area and a lot of my relatives live there and I am aware that the factory is empty now and has been idle for several years. I do not know what extra cost to the Exchequer could be incurred by letting rent free a factory that has been empty for several years.

One of the shoddiest aspects of all this is the cover up and the conspiracy of silence that has surrounded this matter since the deal with Hyster broke down. I am sure that all Members are fully aware that if the negotiations had been successful, if Hyster had gone along with the Government's amendment to the original deal with the IDA, the Minister for Justice, Deputy Noonan, would have been the first person to make the announcement. He would not be talking about 80 or 100 jobs but about 800 jobs in accordance with his usual practice. He would be on the front page of the Limerick Leader and on television and would insist on opening the project but, apparently, that Minister can only be found when credit is to be taken. Where questions need to be answered or explanations given Deputy Noonan is nowhere to be found.

Mr. W. O'Brien

He is always available. I would say Deputy O'Dea is slightly worried.

Mr. O'Dea

From my feedback I am aware that the people of Limerick are copping on to Deputy Noonan. I am not in the slightest worried about the Minister but he is worried about me. The Minister for Industry, Trade, Commerce and Tourism who was forced to carry the can for the Government for the decisions of others was quick to step into the breach. It is possible that he was ordered to do so but he did so with such indecent haste that his statement had the effect of undermining, insulting and slandering a respected agency, the Industrial Development Authority, which has promoted and created so much here in the last 20 years. If the Minister's statement did not insult or offend that agency will the Minister explain why, for the first time in our history, the IDA found it necessary to directly contradict a statement by their own Minister? The Minister's attempt at explaining the differences between his statement and that of the IDA is a load of nonsense. Even a cursory reading of his statement tonight shows that.

The main plank of the Government argument is the risk factor, the risk the project would be to the Exchequer, despite the fact, even on the Government's admission, that it would have cost approximately £1 million extra. Deputy Reynolds quoted from an interview given by the President of the Hyster Corporation, Mr. Kilkenny, to the financial correspondent of the Sunday Independent in the course of which he said that the risk factor involved was not nearly as great as the Government were trying to portray. It must be remembered that Mr. Kilkenny has to deal with the Government in regard to the Blanchardstown project. He has nothing to lose in making such a statement because the project has been committed to Holland. That statement was made in forthright terms.

Debate adjourned.