Estimates, 1985. - Vote 41: Communications (Revised Estimate) (Resumed). – Dáil Éireann (24th Dáil) – Thursday, 13 Jun 1985

Estimates, 1985. - Vote 41: Communications (Revised Estimate) (Resumed).

Debate resumed on the following motion:

That a sum not exceeding £131,488,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December, 1985, for the salaries and expenses of the Office of the Minister for Communications and of certain other services administered by that Office, for a cost alleviation payment and for payment of certain grants and grants-in-aid.

—(Minister for Communications.)

Mr. O'Malley

I wish to continue my remarks in regard to the effort earlier this year of Dan-Air to provide competitive and cheaper services on the Irish Sea routes, in particular between London and Dublin and also Dublin and Cork. In the debate in this House on 1 May I pointed out that Dan-Air had decided not to proceed with their application in the sense of formally filing or lodging it with the Minister for Communications because of things that had been said to them by Aer Lingus. At the time and subsequently there were denials of that by Aer Lingus. On the last occasion when the matter was debated in this House, on 22 May, the Minister for Communications told the House I was wrong in substance and in fact in what I had said. He said I should withdraw my statement and should make a personal statement and an apology. I maintained what I had said was correct and, therefore, that there could be no question of withdrawal.

Since then two newspapers have taken up the matter. Two articles appeared in The Sunday Tribune and one in the Sunday Independent of 2 June. It appears from the articles that the newspapers concerned caused inquiries to be made and as a result of those inquiries they were satisfied that what I said in the House in relation to the matter was correct. I made further inquiries and they indicate that not alone was what I said correct but that the situation is worse, if anything, than I had originally indicated to the House. In so far as I was in error, I was in error simply by understanding the extent of the problem and the threats.

It now appears arising from the newspaper reports and inquiries carried out in conjunction with them that not alone was my statement of a threat to withdraw computer booking facilities for Dan-Air and to withdraw ground handling facilities correct, but that in addition two further threats were made. I was not aware of this at the time until the further investigations were carried out. Those threats were that if Dan-Air were to persist and make a formal application to the Minister, all co-operation on central banking arrangements for ticket payment facilities would be withdrawn from them. In other words, they would have to go out and collect what was due to them from each individual travel agent, which is practically an impossibility. It would be very time-consuming and it would make it scarcely worth their while.

A fourth threat was apparently made, namely, that the interchangeability of tickets — a normal feature of cartel arrangements — between Aer Lingus and Dan-Air would be brought to an end. Therefore, a person holding a Dan-Air ticket could not use it on any other airline. Naturally this would cause considerable inconvenience to Dan-Air passengers. These four threats were very serious and they caused Dan-Air to rethink their position.

At the time that these four propositions were put to Dan-Air they had already got the approval of the British Civil Aviation Authority for their proposed fares as between London and Dublin. I was not aware of that when I spoke in the House on the last occasion. I suspected that they had and I think I said it but I was not aware of it as a fact. In addition, they had got the reluctant agreement of British Airways, the other operator on the London-Dublin route and on Irish-British routes. The agreement was given reluctantly but nevertheless it was given because they regarded it as British official policy due to the fact that the British Civil Aviation Authority had agreed.

Aer Lingus were approached at that stage and they refused. They then set out the four actions they would take if the proposal was proceeded with. It appears at that stage that, because of the board decision of Dan-Air, that airline were prepared to go ahead with their proposal notwithstanding the strenuous opposition to which they were subjected. At that stage a further approach was made in Britain by Aer Lingus — I know the name of the official who made the approach — to a senior person in Dan-Air. He was told that if Dan-Air proceeded the consequences for everyone would be very serious, that Aer Lingus would not take it lying down and would implement the threats already made. Then, in a conciliatory gesture, the official concerned on behalf of Aer Lingus put an offer of settlement to Dan-Air. He said if they would withdraw their proposals for cheaper flights Aer Lingus would allow an additional daily flight to Dan-Air from Gatwick to Dublin. From what I can gather the board of Dan-Air discussed the matter in the light of that verbal communication. Of their nature, all these communications tend to be verbal because things of this kind are never put down on paper. The Dan-Air board decided that in the circumstances where they were reliant on Aer Lingus for handling and computer facilities they would not proceed at the moment with what they had intended to do.

Two newspapers in three articles checked out the situation and they have borne out what I said. We should look for a moment at the consequences of that scenario, because many people in this county believe it is the Minister for Communications and his Department who make the decisions on who goes where, on the price and so on. We are told that constantly but the reality is very much otherwise. The reality is that decisions as to who will fly a particular route, what capacity they will have and what fares they will charge are decided between the IATA cartel airlines behind closed doors at their private meetings for this purpose, which meetings they hold twice a year. The Minister and the Department have little or no say in the matter in reality in spite of what they might think or say. These kinds of arrangements, commercial threats and offerings of routes without reference to the Minister or the Department to settle disputes are on the face of it clear breaches of a number of the provisions of the Treaty of Rome, in particular Articles 85, 86 and 90. I am no expert in this field but it seems very likely to be in breach of British anti-trust law. In connection with that it is worthwhile adverting to the progress of the case taken by the liquidator of Laker Airlines against British Airways and a number of other IATA cartel airlines for conspiracy to put Laker out of business. A substantial offer for damages in settlement has been made by British Airways to try to settle the case. It was interesting to see reported in the Financial Times on Tuesday that the Midland Bank was added as a defendant in those proceedings, although one might have thought they were at a distance from the original proceedings.

The Minister informed me in a written reply last week that he is facing action in the European Court under Article 169 of the Treaty of Rome for failing to give the Commission information which, in fairness to him, he may not have been able to obtain in relation to pooling arrangements between airlines and certain routes out of Ireland which are dominated by the cartel arrangements of the IATA airlines. The Dan-Air case will hardly improve the Minister's position in the prosecution which has been brought against him under Article 169.

Mr. J. Mitchell

Eight countries are involved.

Mr. O'Malley

No, it is seven. Ireland is one and there are six others. They are the more conservative administrations in air transport terms in Europe. They do not include countries like Britain, Holland and Germany. The Minister should be under no illusion as to where British law stands on the application of the anti-trust legislation to aviation matters. He should remember that the considerable desire of British Airways to settle with Laker before the privatisation of British Airways is not due to British Airways wanting to make friends with their own rival but rather because the market has decided that British Airways owe Laker a lot on money because of the way they conspired to put him out of business. British Airways will be privatised for far less if the Laker case is not resolved before British Airways is brought on the market.

There can be no doubt that the Dan-Air case, which I brought to light here and which it transpires is now more serious than I originally thought, has certain similarities with the Laker case and based on the precedent of the Laker case which British Airways are engaged in almost daily efforts to settle, Dan-Air would be likely to succeed if it took a similar case in the British courts against Aer Lingus. That is regrettable but nevertheless it is the position. The British courts would be the appropriate venue for any such action because the threats and the offers involved were all made in the UK. In all these circumstances and in order to obviate further difficulties and loss to the economy as a whole, the Minister should contact Dan-Air directly and discuss and accept their proposals or some variation of them which could be implemented at the earliest possible time.

Sometimes it is suggested that I or other people who have a closer connection than I have with the aviation industry are inaccurate when we say from time to time that the real decisions are not made by the Minister of the Department but somewhere else. There might be people who would think that it could not be the case that a Minister and a Department established for the purpose of regulating air routes, air capacity, air fares and charges would abdicate their responsibilities and allow the real shots to be called by someone else. However, that is the case.

As evidence of that I do not just present my assertion or the assertion of many thousands of people involved in aviation but internal evidence from Aer Lingus about how they function in regard to these matters. This evidence is the best possible because it is the evidence of Aer Lingus and is an internal Aer Lingus memo dated 6 July 1982 addressed to PIAM from GIAS. These letters stand for particular functions or titles within Aer Lingus. This memorandum, together with a lot more, have come into my possession and that of other people as a result of a High Court case between Avair and Aer Lingus. The High Court made an order of discovery of various documents and communications relating to matters that were relevant to the points in dispute between Avair and Aer Lingus. Accordingly, this document has now become a public document. I do not want to be accused of having obtained it in an improper way. It is on record as a result of High Court proceedings. I will quote three paragraphs from it. It bears out what I have been saying for some time. It states:

I want to convey to you my disagreement with the decision to oppose the granting of traffic rights on Cross Channel routes to minor UK (P) points to an independent Irish carrier; and to express concern at the implication. As I see it the logical outcome of such a course of action would be to oppose everything that moves (other than Aer Lingus), and we would soon lose our credibility and our power to influence the Minister's decisions.

As you know, the Government Department responsible for aviation in Ireland, (currently the DoT) has never found it necessary to establish a licensing authority, but has relied largely on the informed comments supplied by Aer Lingus. As the person responsible for conveying these comments to the officials concerned over the past ten years or more, and indeed of formulating the comments (with, of course, management approval where necessary), I have built up a good working relationship with those concerned, and a good feel for "what we can get away with".

Our comments have, naturally, ranged from "no objection" through a considerable range of light, medium

And I regret to have to say that it was no different for a number of years before then. As I said here on a previous occasion, I was a Government Minister for eight years and I cannot recall any time during those eight years these matters coming before the Government. I have no reason to believe that the position is otherwise now. That memorandum in its tone and content sums up precisely the reality of Irish aviation policy. It is as we suspected and that is the proof. The matter is very serious and very regrettable. Unfortunately when one seeks to dissect and analyse the situation as I do, the exercise is seen in personalised terms. It is not considered in the context of whether it is right or wrong, of whether it is in the national interest or otherwise. Instead, it is regarded totally in terms of whether one is for or against Aer Lingus. The national interest is equated with Aer Lingus at all times. Therefore, if one is against the way Aer Lingus operate in respect of certain matters, one is therefore considered to be against the Irish national interest and since no one wishes to be seen in that light, very few speak about the issue.

There was a debate on the Second Stage of the Bill on 27 June last year and at that time a number of backbenchers on both sides of the House but particularly on the Government side spoke after I had spoken in fairly broad agreement with what I had said. I recall one of them describing the whole matter as a can of worms which was then being opened up and which needed to be opened up. Several others spoke in a similar vein. Unfortunately we have only had some hours of debate so far on Committee Stage but with the exception of one or two backbenchers who spoke for a couple of minutes, no other spoke to indicate whether he was for or against the Bill. I understand the position to be that they had been told not to speak.

Mr. G. Mitchell

That is totally untrue.

Mr. O'Malley

It is unlikely that they have changed their views since they spoke last year. However, they have not been speaking despite the degree of public interest that has been engendered in this whole area and despite the fact that the problems associated with this area are far greater now than would have been the case 12 months ago.

The situation which has been made clear by the clarification of the Dan-Air dispute and the proof of the thinking in regard to aviation matters is evidenced by the memorandum I have read from. This should help Members of the House and the public also to put into some better perspective than has been the case up to now what should be our objectives in relation to aviation policy generally. No country in Europe has a greater vested interest in ease of and in freedom of access than we have. Therefore, the official policy we should follow is the policy of trying to generate the highest degree possible of ease of access because if we do not have ease of access to and from Ireland we stand to lose more than any other country. That should have been obvious for some time but for the reasons I indicated in the earlier part of my remarks today we do not pursue that kind of policy. Consequently, we put ourselves in the ridiculous situation where we limit access to this island very severely by limited capacity and by some of the highest fares in Europe, if not in the world.

From time to time we receive offers of the provision of competitive non-cartel fares from cost efficient non-cartel airlines. There are two on the table at the moment. One is the Dan-Air one which has been withdrawn, temporarily I hope, and the other is a proposal from Virgin Airways who would envisage a return fare between London and Dublin of £72. It is in our interest to do business with these kinds of airlines. We are in the extraordinary situation as is indicated by the Aer Rianta press release published in last Monday's newspapers, of having no growth, taking one year with another, in the use of our airports. The only airport in which there has been growth recently is Shannon in respect of which there was a worthwhile increase last year. This was due to the much more competitive situation on the Atlantic routes where the IATA cartel has broken down to a large extent. As Aer Rianta point out constantly, due to the unattractive fare structure there is no growth in either Dublin or Cork airports. There are fewer people using those airports than was the case six or eight years ago.

As Aer Rianta point out further, we are almost unique in Europe in that respect. Our national interest cannot be served by a continuation of that no growth scene when there is growth everywhere else in Europe. We simply cannot continue along that path. If we do, we are keeping people out of here, we are harming our tourist industry and we are harming our manufacturing industry because of the difficulties that exist in relation to cargo and business travel. The reaction of the Minister and of the Government has been to introduce the legislation which has very intermittently been debated on, I think, three occasions in the past 12 months. That is running counter to everything that is happening in the world elsewhere and to all the developments in Europe, at Commission level and elsewhere.

I quoted in the House — I think Deputy Wilson also quoted — some of the things that Commissioner Sutherland had to say in regard to trying to open up and create competition between airlines in Europe. I recommended at the time that the Government here would be well advised, that it would be in our national interests, to follow the line recommended by Commissioner Sutherland. Since then I see in the current issue of Community Report for June 1985 an article based on remarks made by the Transport Commissioner, Mr. Stanley Clinton Davis, at the Labour Party Conference in Cork — which he attended as a fraternal delegate — at which he advised very strongly the Irish Government to liberalise their approach to air transport, to follow the example of certain European Governments. I quote:

He told a news conference during his visit that many air fares in Europe were grossly unfair to customers.

He said that the Commission did not want to replace the present system with an open skies policy on the US model, but it was pressing for more realistic charges.

There had been resistance to change from some airlines and governments but he pointed to agreements between British, Dutch and German airlines to show what could be done...

Mr. Clinton Davis said the central aim of the Commission's proposals was to remove the various veto rights which governments or airlines could exercise over the setting of fares. If these were removed then innovative airlines would be in a better position to bring about the changes which are necessary to benefit customers.

The next 18 months or so would be crucial. The Commission was prepared to negotiate towards an agreement, but if member governments were unwilling to introduce the necessary flexibility then the Commission would have to act.

He is the second Commissioner within the past month to have said exactly the same thing because, in substance, that is what Commissioner Sutherland has been saying also. What are we doing in response to it? We are doing the direct opposite to what they are asking us to do. We are going back even further into the old protectionist mode even though we see it breaking up all round us. We are doing it at great detriment to our own interests. It is worth looking at those who find it difficult to support the present policy and are critical of the traditional policy which is now being copper-fastened in the legislation before the House. They are a wide-ranging list of people who are affected by it, or represent those affected by it, one way or the other. They include people like Bord Fáilte, very much opposed to the traditional aviation policy here, Aer Rianta who time and again make statements making it clear that they are very much opposed to the traditional policy here, various tourist interests, like the Irish Hotels Federation, and various other people who speak for tourism who see quite clearly, as most of us do who think about it, that a change in policy would enormously benefit our tourist industry and economy generally.

The Confederation of Irish Industry in the last couple of months issued a statement to this effect, the Association of the Chambers of Commerce in Ireland who are very much opposed to the present policy, and so on. There are large numbers of such bodies. Still the overall interests of the economy at large are subsidiary to the institutional interests of one organisation. That is wrong. I am not anti-national in saying that. I am pro-national in saying it. I am pro-national in saying that we must not allow the institutional interests of one organisation to stand in the way of national economic growth, but that is what we are doing. The Minister now realises he is on the wrong track. I know it is awkward for him to back-track from where he started, but he would win a great deal of respect were he to do so. He should give very

serious consideration to that possibility.

I want to point out one consequence that is overlooked very much by people who talk about these matters, one consequence of the maintainence of the cartel arrangement on the Irish scene between Britain and the Republic of Ireland. There is, of course, no cartel between London and Belfast. Even though Belfast is further from London then is Dublin, the fares between Belfast and London are half or less than half of those between Dublin and London. One of the consequences of maintaining the extremely high fares constantly being described by people in the industry as among the highest in the world — between London and Dublin at £200, between London and Cork at £232 and between London and Shannon at £232 — is not simply to prop up Aer Lingus and give them very substantial profits, as they have, on these routes but equally to prop up British Airways, giving them very substantial excess profits on these routes, enabling them to operate low and competitive fares in other places where they are subject to competition such as London-Belfast, London-Glasgow, and so on.

It is forgotten by people who seek to argue that this is being done in the institutional interests of Aer Lingus that Aer Lingus are in a cartel pool on the Anglo-Irish routes and that British Airways get half of everything that goes into that pool. This, being the inevitable result of a European system of air cartels which we go to such lengths to maintain in this country but which the British themselves are not prepared to maintain on other routes, must be causing British Airways to laugh all the way to their stockbrokers when they consider the impact on their privatised share price of the resolutely-maintained official Irish policy and the consequences of the Bill at present before this House.

I wonder whether any Minister has come into Dáil Éireann before to introduce a measure which he says is in the national interest, when with a minute's thought it would be obvious that half the revenue from the excessive charging for passengers, freight and mail on routes between Britain and Ireland, would accrue as super-normal profits for British Airways. It has been estimated by cost efficient airlines that it is possible to operate the Dublin-London run for £100 or less, return fare. That is half the existing standard cartel charge. That means that there is a degree of overcharging on that route of about £100 per passenger, where the full fare is paid. That figure is borne out by the EC Cascade studies which indicate that on average a charter type airline could provide the same service as a scheduled operator on the same route for between 34 per cent and 37 per cent of the scheduled charge.

We have the extraordinary situation that British Airways are benefiting enormously from the level of charges which are being maintained under the cartel operation because they are getting 50 per cent of everything in the pool and as between Dublin-London, Dublin-Shannon, Dublin-Cork, everything is going into the pool. Would the Minister seriously consider that? Is it in the national interest that half of all that money is unnecessarily going into the coffers of British Airways at a time when British Airways are doing all they can to maximise their profits because they are about to be privatised in the next few months? It is a ridiculous situation and if one thinks about it it is quite indefensible. Half of the high profits on this route are going to British Airways even when Aer Lingus carry more than 50 per cent of the passengers on the route, as they do from time to time. I would be interested to hear how the Minister justifies that. Is not the truth of the matter that British Airways can offer very competitive fares on other routes, domestic routes such as Belfast and Glasgow and international routes such as Amsterdam and various German destinations because they have, among other things to fall back on, the supernormal profits they obtain from their cartel booking arrangement with Aer Lingus on the Anglo-Irish routes? I do not grudge the people of Belfast, Glasgow or Amsterdam the fact that although they are further from London than Dublin——

An Leas-Cheann Comhairle

The Deputy has five minutes to conclude.

Mr. O'Malley

——on average fares are about half of what we in the Republic have to pay and those in Britain have to pay to get to the Republic, but we should not perpetuate that system because it is largely at the expense of our economy. We should not be prepared to tolerate it. Whether or not the Minister likes it or whether or not Aer Lingus like it, big changes will come. I quoted at length the views of two members of the European Commission and the views of various officials of the Commission. Changes will be made and we should take advantage of the situation and not fight this futile rearguard action against our own interest and the interest of other countries and other competing airlines to retain what has now largely gone out of date.

Members of the House or members of the public who are interested should read an article which appeared in The Irish Times on 16 October, 1984 which was written by Mr. Martin Dully, the chief executive of Aer Rianta. In the article he discussed in some detail the damage that has been done to our economy and to the overall national interest by the pursuit of present policies and he advocated change, broadly the kind of change that I am advocating, and he outlined in some detail how it would benefit our economy. There are phrases in that article which are unexpected but they show the extent of his concern and his feeling of frustration. The chief executive is the person in the best position to judge the effects of aviation policy and the damage being done by it to the country, because he is in the centre of operating our airports on an almost daily basis. That article is well worth consideration and I hope the people will give it consideration and will come to realise that in trying to bring about change in the policies being pursued I and many others who agree with me are doing so in the national interest and because we are annoyed and frustrated at seeing no growth in incoming air tourists.

Mr. J. Mitchell

No incoming——?

Mr. O'Malley

Air tourists. From Britain alone we have 50 per cent of the number of tourists according to the CSO figures that we had eight years ago.

Mr. J. Mitchell

That has nothing to do with Aer Lingus. That has to do with bombs.

Mr. O'Malley

At the same time we have had a much bigger share of the incoming market from the sea. There has been no growth at all in the number of air tourists coming from continental Europe and people are prepared to go to considerable inconvenience and undertake a long sea voyage in order to get here. These are the realities of where our interests lie. While the Minister has gone down the wrong track, he was probably steered onto that track——

Deputy Wilson asked about the relationship between CIE and GAC and also about the export of buses. The relationship between these two concerns is a matter of day-to-day activity as far as CIE are concerned, and the Deputy is well aware that Dáil questions in that area are not in order. Moreover, GAC are a private sector concern for which I have no responsibility. I am not in a position to give the Deputy the information he seeks any more than I would be in the case of any other supplier with whom CIE might have an arrangement.

Like Deputy Wilson, I have been hearing allegations about unwarranted price cutting by CIE road freight. People ought to clear their minds about this type of complaint. In the transport area competitive behaviour by CIE is very much to be welcomed. A vigorous commercial approach by CIE must be beneficial to transport users and also to the taxpayer who must invest so much in support of CIE services. As far as alleged unfair practices in the freight transport area are concerned, I remind the Deputy that direct subvention is not payable in respect of road freight transport and I am determined to ensure that indirect subvention will not occur.

Deputy Wilson asked about CIE pensions. The intention is to supplement normal social welfare payments so that generally CIE workers receive a pension equivalent to two thirds of their wages when retired. The level of these pensions is broadly comparable to pensions payable elsewhere in the public sector which provide for maximum of half pay plus lump sum or two thirds pay. Let me say again that I am delighted at being able to increase the maximum pension from £16 to £34. Many people who have given a lifetime of service need an increase of that sort.

On Deputy Wilson's question regarding UTC, at present 125 junctions are operating with urban traffic control facilities. Dublin Corporation anticipate that preparatory work on the remaining 66 junctions will be completed by September 1985.

Mr. Wilson

I did not get the number.

Mr. J. Mitchell

There are 125 junctions already in operation and the preparatory work on 66 junctions will be completed by September 1985. It is intended that between September 1985 and mid-1986 all phases of the UTC system incorporating elements such as Bus Transit automatic counting etc. will become fully operational.

Deputy Wilson remarked on the so-called monopoly position of CIE. It is difficult to consider seriously the suggestion that CIE, who are beset on all sides by competition from other professional carriers, own account freight transporters and the private car, are enjoying anything like a real monopoly. Certainly I would not wish CIE to enjoy any unjustified degree of monopoly or protection which would give then an unfair advantage over other operators. I can assure the Deputy that CIE are not in any sense afraid of competition or afraid to operate competitively. It is important to make this clear. Competition is a healthy thing but we will not get very much competition on those many routes which are intrinsically loss-making and CIE have to bear the cost of these. There will be plenty of people who will go for the nice, juicy route — and the same holds for air transport. People will be interested in the high volume routes but not in the low volume, off-peak routes.

Deputy Kelly also referred to monopolies and dealt at length with the whole philosophy of monopolies from various standpoints. He raised questions as to whether State monopolies were justified in a situation where they were costing the taxpayer so much. I regard that as quite a legitimate point to raise. It is fair to point out, however, that most of these services are not monopolies in the strict sense. They have to compete with alternative systems of transport and communications. I expect the fundamental concern of Deputy Kelly is that the State-sponsored bodies should be operating fully efficiently. That is my concern too. It is my abiding passion because I believe in State companies and State enterprise and believe it can be and ought to be efficient.

The transport policy document to which I referred in my opening statement will be raising the general issue of monopolises and State ownership, and the question of whether changes made will be reviewed in the light of the public debate.

Deputy Wilson criticised me for keeping my comments on my general responsibilities in regard to semi-State bodies to the end of my statement and inferred that in so doing I was relegating these bodies to an inferior position. I can only conclude that Deputy Wilson is under some misapprehension. Most of my statement deals with the activities of the State-sponsored bodies under my control. I made comments which were a statement of my general philosophy in regard to State-sponsored bodies and I believe that having dealt with the activities of the individual bodies it was an appropriate point at which to give overall comments.

Questions in regard to shipping were raised by Deputy Wilson and Deputy Kelly. The position in regard to redundancy compensation for the former employees of Irish Shipping Limited is a matter for the liquidator to be dealt with within the terms of the Redundancy Payments Acts. There are no funds available from which compensation payments other than statutory redundancy entitlements can be made. The position of the former Irish Shipping Limited employees is no different from that of other workers who have found themselves redundant in similar circumstances. It is a most tragic consequence of the liquidation of Irish Shipping Limited that the employees and their families are innocent victims of the situation. I am saddened that the legal and other sensitivities in this area preclude me from doing anything else to help these unfortunate people.

Mr. Wilson

Workers in other situations did get much more than the statutory payment.

Mr. J. Mitchell

Deputy Wilson mentioned the £66,000 gross, or £27,000 net, which was paid to the late Mr. O'Neill when he retired as chairman. He had a contract of employment which had two years to run and he was paid his salary until the end of that term so that he would go. That was done after a lot of heart searching and advice as the best way and this was before we realised the full extent of the problem.

Mr. Wilson

Other workers got more.

Mr. J. Mitchell

Deputy Wilson will know that all these cases are quite different and that bankruptcy law precludes any preference for one creditor over another. It is a regrettable fact about which I am very sad.

The payment of wages due to the employees of Irish Shipping Limited is a matter for the liquidator of the company. The employees are preferential creditors of the company in relation to wages due to them and in the event of wages remaining unpaid they would have first call on the assets of the company.

The matter of Irish Shipping pensioners was raised during the course of the debate on the Supplementary Estimate. My colleague, the Minister of State, explained on that occasion that when the Government were considering the restoration of the ex gratia pension element, the possibility of extending this concession to all pensioners of the company was considered. Due to the financial and legal sensitivities involved it has not been found possible to do this, however much we would like to do so. The present position in relation to World War II pensioners is that final arrangements are being made for early payment of their pensions.

Regarding the question of a strategic fleet, I would refer Deputies to my statement to Dáil Éireann on 14 November 1984 in relation to the appointment of a liquidator to Irish Shipping Limited. I then indicated that the Government had given careful consideration to the question of a strategic fleet and were satisfied that the winding up of Irish Shipping Limited was not a cause for concern in terms of our current strategic needs. I have recently initiated a review of maritime transport policy in my Department and it will address the question of a strategic fleet, among other matters.

The question of what to do with the 75 per cent shareholding of Irish Shipping Limited in Oceanbank Developments Limited, which owns Irish Continental Line, is now a matter for the liquidator. Irish Continental Line is, in turn, the owner of Belfast Car Ferries. The 25 per cent shareholding held by AIB in Oceanbank is, so far as I am aware, unchanged since the liquidation of Irish Shipping Limited.

Irish Continental Line is a successful and profit making company even if it has been affected to some extent by the recent recession in tourism. There is, to my mind, no reason why it should not continue as a going concern. I do not foresee its being forced into liquidation or receivership. Presumably the liquidator's objective will be to dispose of ISL's shareholding in the company to the best advantage of the creditors of Irish Shipping Limited. Certainly the Government would be concerned that there should be an Ireland-Continent ferry service but there is no reason why such a service cannot be provided by a private enterprise company operating profitably.

Deputy Wilson inquired about the Irish Spruce. The acquisition of the Irish Spruce was funded by a consortium of Japanese leasing companies and the vessel was operated by Irish Shipping Limited under a bareboat charter which was fully guaranteed by the Minister for Finance. The total amount guaranteed by the Minister at current exchange rates is approximately £39 million.

I am at present considering proposals regarding the future of the Irish Spruce. I have been approached by the Irish Marine Services Co-operative Society Limited, which was set up by former Irish Shipping staff, regarding a possible contract for the management and chartering out of the Irish Spruce and this aspect is one of those under consideration. In the meantime the vessel cannot be moved without the agreement of the Japanese owners.

Deputy Wilson also mentioned the possible contract for the carriage of coal to Moneypoint for the ESB. I wish to make it clear that there was no such contract. I understand that some negotiations had taken place between Irish Shipping Limited and the ESB but these negotiations were not concluded. There was no contract.

The B & I company concluded a pooling agreement with Sealink some months ago. The arrangements between the companies are for 1985 initially and are to be reviewed later this year. The rationalisation arrangement is a matter falling within the day-to-day management of B & I and I do not interfere in such matters. I understand that the company have discussed the arrangements with tourism interests who sought such discussions.

Deputy Wilson referred to the arrangement under which a consultancy firm providing the full time services of Mr. Alex Spain were engaged to bring about a recovery in the finances of B & I The general deterioration in the company's finances had been a cause of concern to me and the Government and led us to the conclusion that a fresh approach was needed. As a result of many inquiries, we came to the view that his extensive financial and management experience fitted Mr. Alex Spain in a particular way to undertake this onerous task. It was also a factor that he could call on the expertise and advice of his highly experienced partners in his new consultancy firm. There is no criticism involved of the way in which the former chairman and his board carried out their duties; I and the Government were, however, satisfied that a new approach was required.

I have already paid ample testimony to the commitment of the outgoing chairman who was acting in a part time capacity and now that the job has been made full time the nature of the appointment has changed. However, the services of Mr. Boland will be retained in the public sector in another important appointment which will be announced shortly.

Deputy Leyden raised the question of the rationale behind adjustments in postal tariffs on 25 February last. There has been no increase in the normal letter rate since 1982 and there will be none this year. I decided, very soon after coming to office, that there would be no increases and that our policy must be to keep our postage rates steady and to go for volume growth. That strategy is beginning to pay off and the adjustments in postal charges on 25 February last involved maintaining unchanged for the third year in a row the existing basic 22p and 26p letter rates, as well as a reduction in letter rates to other EC member countries. Increases, where they occurred, were concentrated in letters over 20 grammes, non-standard items and parcels. The Postal Service User's Council, on which there are representatives of industry, services etc., were consulted in advance about the adjustment and were in agreement with the approach proposed by An Post.

Deputy Leyden also raised the question of capital investment requirements of An Post. The provision in the legislation relating to making moneys available to An Post for capital purposes was a purely enabling one and did not reflect a measured assessment of the real capital investment needs of the company. Because a sum of £50 million was mentioned in the Bill, some people seemed to think that that money should be spent on An Post. However, that is not the case. For example, when you say that the borrowing limit of a company is a sum of £200 million, that does not mean that that sum will be granted and it is the same in regard to An Post. Some newspapers in the last few days also raised this point saying that we did not invest as much as we said we would. We have a duty to the taxpayer to make prudent investments as and when required, taking into account the finances of the Exchequer.

Deputy Leyden also inquired about the extension of the post bus service. To date, the post bus service in west Clare in 1982 has been successful even if the contribution to the finances of An Post has been limited. This experience is not, however, an adequate base for coming to general conclusions and experimentation with further post bus services in other suitable areas is essential. Further areas have been identified as meriting consideration and the Department of Communications are pursuing the question of their inclusion on an experimental basis with An Post.

Deputies Wilson and Leyden referred to the contributions to be paid to the Exchequer by BTE and claimed that it was unfair to require BTE to make them and that their financial position did not allow of these contributions being made.

From the outset, it was never intended that BTE should get handouts from the Exchequer. It was always the intention that telephone users would have to pay for the service and that the general taxpayer would not have to subsidise it. That was the position over the years. When it was decided in April 1982 to convert £355 million Exchequer debt capital to equity, this was done, as I explained in my introductory statement, on the basis that dividends would be paid to the Exchequer by the company over a period of ten years from vesting that would equate with the costs continuing to be incurred over that period in servicing the debt in question. I am sure that Deputy Wilson will agree that what I said in my opening speech and am saying now is accurate.

It was envisaged at that time that the company would become profitable quickly and could pay the dividends needed to service the capital. That has not happened and is not likely to be the case for a few years. The Exchequer would, therefore, be continuing to service the capital without getting compensatory payments from BTE, which would involve extra taxation. The Government decided that, instead of levying extra taxes, BTE should provide money that would enable the capital to be serviced and the contributions are designed to do that.

BTE will, as I explained this morning, be compensated fully for these payments on a present net value basis by allowing equivalent credits against the Exchequer debt taken over by the company at vesting. In time, the contributions will not cost the company anything and it is important that this should be clearly understood. BTE will be returning losses in the short term but, as they move shortly from the development to the consolidation stage, that position should change quickly. The company have a very bright future, given good management and the willing co-operation of all involved.

There is, therefore, nothing sinister or unfair in the requirement that the company should make these contributions, In a better financial climate, they could probably have been avoided but none of those who criticised the decision to require these contributions indicated how they would service the debt involved and there is an onus on them to do so. I did not make any charges against the Opposition in regard to these contributions and I do not see that this arises. However, the Opposition are criticising the fact that contributions were called for and are trying to make political capital out of it. How would the Opposition finance the Exchequer debt if the contributions were not required?

I am sorry that I have not had time to deal with all the points raised but I will endeavour to write to Deputies regarding those which I did not mention. Deputy Leyden talked about bias in RTE programmes and I think he specifically mentioned "Morning Ireland". As he knows, the Minister has no role in the contents of programmes or in regard to bias and that is the way it should be. I also regret his remarks about some members of the incoming authority, all of whom are highly respected and worthy people.

I wish to thank Deputies for their comments and indeed for their criticisms. Some have substance but others were unfair and unjustified. This is a year of major change for transport. There will be at least ten major transport Bills, four are already before the House and two more will be introduced over the next couple of weeks. At the end of the year, when all that legislation is passed — as well as the publication of the Green Paper on a national transport policy — my belief is that we will end up with a vibrant, efficient transport system.

Dáil Éireann debate - Thursday, 13 Jun 1985

Estimates, 1985. - Vote 41: Communications (Revised Estimate) (Resumed).

Dáil Éireann debate -
Thursday, 13 Jun 1985