move:
That paragraph 1 of the Orders of Reference of the Joint Committee on Commercial State-Sponsored Bodies, constituted pursuant to the Order of Dáil Éireann of 21st June, 1983, and the Order of Seanad Éireann of 29th June, 1983, be amended by the deletion of all words after ‘Bodies') where it first occurs and the substitution therefor of the following:—
‘to examine—
(a) the Reports and Accounts and overall operational results, and
(b) in the light of the reports published pursuant to sub-paragraph (a), the common issues relating to Board responsibility, structure and organisation, accountability and financing, together with the relationship with central Government and the Houses of the Oireachtas
of State-Sponsored Bodies engaged in trading or commercial activities referred to in the Schedule hereto and to report thereon to both Houses of the Oireachtas and to make recommendations where appropriate.'.
This motion broadens the terms of reference of the Joint Committee on Commercial State-Sponsored Bodies. At the moment essentially the committee look at each individual State body and make individual recommendations about these State bodies. This is, of course, a very useful and practical activity. It is an activity which has been conducted for quite some time now by the present and previous committees. In the course of that work they have accumulated, in the view of the Government, a number of useful ideas about the general management of State bodies as a whole, as distinct from the particular recommendations that they made about the individual bodies on which they produced special reports. That is why we are proposing in this motion to expand their terms of reference to allow them to examine the reports and accounts and overall operation results of bodies and, in the light of these reports, to examine also issues common to a variety of or more than one State body, relating to board responsibility, structure and organisation, accountability and financing, together with the relationship with central Government and the Houses of the Oireachtas.
The motion before the House follows on a commitment by the Government in the White Paper on Industrial Policy published last year to expand the orders of reference of the Joint Committee on Commercial State-Sponsored Bodies. This, in turn, is part of an overall desire by the Government that the commercial State bodies, which have been subject to growing criticism in recent years for a variety of reasons, should once again reestablish themselves as a source of commercial and entrepreneurial innovation in our industrial and economic development.
In view of the diversity of their activities and the varying reasons for their incorporation into the State sector, in the first place, there is a need to devote serious attention to the development of a properly structured relationship between the State bodies and central Government.
There are many reasons for the overall poor financial position of the commercial State bodies. While these bodies have, like other sectors, felt the effects of recession and adverse cost movements, other factors, sometimes unique to State enterprises, have led to the present situation. Such factors, which are unique to State enterprise, identified in the White Paper, include:
(1) lack of clarity in objectives and confusion between commercial, social or strategic roles, particularly where questions of closures or cessation of operations arise;
(2) the imposition of non-commercial obligations or arbitary tax and price adjustments on products or services provided by State bodies;
(3) inadequate surveillance and control in relation to matters such as major capital projects and refinancing;
(4) an expectation by boards, management and employees that the Government would be obliged in practice to bail out various enterprises and honour their debts, and that market disciplines which apply to non-State owned companies would not apply;
(5) under-capitalisation and excessive reliance on guaranteed borrowing rather than equity; and
(6) lack of capacity to adapt quickly enough away from wrong product or market situations.
The White Paper detailed a number of measures, which have now been introduced, aimed at improving the commercial performance of the State bodies. Corporate planning has been introduced to ensure that the bodies become commercially oriented. They have been directed to draw up five year rolling corporate plans in respect of their activities. These plans are designed to provide an outline of corporate objectives, the strategies which are being adopted and the detailed programmes to achieve these objectives. In addition, projected profit and loss accounts, balance sheets, cash flow statements, production targets and cost reduction programmes will be required on an annual basis.
Central Government have improved the monitoring of the State bodies. New reporting arrangements have been devised whereby the relevant Minister will regularly review the performance of each body with emphasis on financial and trading particulars, production levels and actual performance as against targets.
Measures have been introduced to prevent a repeat of the cost overruns of recent years by more intensive monitoring and control of investments and a more systematic approach is being adopted in appraising capital projects. In addition, improved project management techniques are being applied. Appointments to boards of State companies will reflect the type of skills and expertise required by each body, and board members will also have their role and responsibilities more clearly defined.
Essentially, we must achieve a balance between the legitimate freedom of the bodies to pursue their operations within a commercial framework and the control necessary to safeguard the interests of the public to whom they are ultimately responsible.
The Oireachtas has a legislative role relating to the formal establishment of nearly all of the commercial State-sponsored bodies and the Minister responsible are answerable to the Oireachtas for the overall policies and operations of the bodies. The establishment of the first Oireachtas Joint Committee on State-Sponsored Bodies in 1976 was one of the most significant developments in recent years as far as increased control and review of the commercial State-sponsored bodies by the Oireachtas were concerned. It heralded an increasing awareness on the part of the Houses of the Oireachtas of the activities of the State bodies.
The original committee, which produced 18 reports on individual bodies before lapsing in 1981, played a very useful role in provoking both public and parliamentary interest and debate on the State-sponsored sector. However, the terms of reference of that committee, as in the case of the present committee on commercial State-sponsored bodies, restricted the role of the committee to an examination of the past performance of State bodies. Moreover, the committee had to concentrate on specific bodies, essentially on their activities and financial results. Because of the terms of reference, very little attention was given to broader areas affecting the role of these bodies as a whole.
As part of their general review of the commercial State bodies, the Government decided that the committee's mandate should be extended to enable the committee to bring their experience to bear in a more constructive manner. The extended terms of reference as proposed by this motion, will empower the committee to examine the common issues relating to board responsibility, the structure and organisation, accountability and financing and relationship with central Government and the Oireachtas of the commercial State bodies. While I would not like to pre-empt the committee in their new task, the fact that the Oireachtas establishes these bodies places on it the responsibility for ensuring that the founding legislation for these bodies is clear, concise and unambiguous.
I would like to take this opportunity to thank the committee for their work to date which, I believe, will be even more valuable and constructive with this extension to the committee's terms of reference. Accordingly, I commend these changes to the House.