The Minister commented on co-operative societies which are referred to in the amendment. Am I correct in thinking he said they would be required to become involved? What did he mean by this?
National Development Corporation Bill, 1985: Committee Stage (Resumed) and Final Stages.
Debate resumed on amendment No. 17:
In page 7, subsection (1), between lines 33 and 34, to insert the following paragraph:
"(m) to develop a comprehensive plan for revitalisation of the food processing industry through profitable innovation by the state sector, the private sector, and co-operative societies.".
—(Deputy Mac Giolla)
I responded to Deputy O'Keeffe who suggested it would be good if co-operatives put forward projects in which the NDC might invest with them — it could be subsidiary companies established by the co-operatives. I agreed with what Deputy O'Keeffe said and I welcomed his statement.
I made my comment in the context of the difficulty of co-operatives in providing capital because of the nature of their business. Farmers try to get as much as possible for their products. That industry is hazardous and farmers must make an effort to get as much as they can. They have very little left in terms of profits to plough back into co-operatives. They have an equity problem.
There is no money in it.
The Minister agrees with me. I see it as a way out for the co-operatives that they might get involved with joint ventures with the NDC. There is also the matter of the level of funding to be made available, the source of the funding and the cost of the money.
Will the terms of association that it is intended to apply to State-sponsored bodies, in accordance with section 10, apply to co-ops? If co-ops become involved what structure will apply to them? We must remember that the co-op movement is involved in a different type of activity from that of State or semi-State bodies. If we are to invite co-ops to become involved for the purpose of investment, as suggested by Deputy O'Keeffe—investment is about the only way the NDC will be involved —will the terms of association be the same as those in the Bill for State-sponsored bodies?
As the Deputy will be aware—I am sure Deputy O'Keeffe will confirm this—although the co-ops were set up under the industrial and provident societies they have already been establishing limited companies and subsidiaries. The NDC are not precluded from investing in co-ops as such but as they have a strong duty under the general duty in section 13 to obtain a reasonable return from investment—essentially co-ops do not give out very large dividends normally and tend to re-invest the money— I expect that the vehicle whereby co-ops would seek to attract NDC investment would be on the basis of them establishing a subsidiary company in which they and the NDC would invest. I am aware of plenty of co-ops—Kerry is one that I am aware of—who have established limited companies as subsidiaries.
Are we saying that for co-operatives to be involved with the NDC it will be necessary for them to set up subsidiaries?
No. This is what is called in courtroom parlance, leading the witness.
I want to be clear about this.
The Deputy appears to be giving evidence himself which is worse.
Thank you, lawyer. The benefit of that interruption is welcome. I am always prepared to learn.
If the Deputy wants an answer to his question he should desist from interrupting.
What about the Deputy behind the Minister? Are lawyers permitted to interrupt?
We heard him saying, mea culpa.
The fact that I expressed the opinion in order to be helpful to the Deputy, that it is likely that co-ops in order to look for funds will set up limited companies does not mean that I am saying that they have to do it, as the Deputy is trying to suggest. I was careful in choosing my words the first time and I do not think clarification should be necessary.
I was glad to hear the Minister say that he would encourage the development of the food processing industry. I would like an assurance from him that that desire to develop the food processing industry extends to what are called the 12 western counties because I was a little perturbed when the National Economic and Social Council recently indicated that they favoured having another look at the designated areas. The implication was that some of the special facilities would be removed from those areas. After looking at the National Economic and Social Council personnel I was extremely dubious about the qualification of most of the people on that council to assess the economy in the 12 western counties. Consequently, I ask the Minister to assure the House that his commitment to the development of the food processing industry extends to those 12 western counties without modification of the present aids. Apart from representatives of the IFA and the ICMSA, neither of whom as far as I could make out are from that area, the remainder of the council would seem to me to be lacking in experience of conditions in that part of the country. An assurance from the Minister that his approval is a blanket one and that he is taking into account that the aids that obtain now for such development will be continued will be welcomed by the House.
This does not arise at all. The NESC report related to grants and differential rates of grants. The IDA give grants. The Bill before us is about the National Development Corporation who do not and will not give grants. They will, of course, be happy to invest anywhere in Ireland where they see a useful profit and job creating opportunity.
But with the IDA as a bedfellow?
Not necessarily. The IDA may do it on their own if they wish. I can assure the Deputy that the corporation will consider the needs of the 12 western counties and those counties which happen to be north of this place as distinct from west of it, including County Cavan.
Cavan is one of the 12 western counties.
Those counties will be considered for investment by the NDC.
But will IDA investment preclude the National Development Corporation investing in the same venture?
Not at all. I am sorry to have to repeat myself but I must point out that the National Development Corporation will be investing in companies in the same way as a private venture capital company or as the Industrial Credit Company invest. The IDA, CTT and others give grants for activities. No company will be disqualified from getting money from the IDA just because the NDC happen to have a 10 per cent or, for that matter, a 51 per cent share in it and companies will have no guarantee of getting grants just because they are a NDC company. If the IDA do not think the project put forward is a good one although the NDC may think it is, the IDA will not be under any obligation to invest. Likewise, if the IDA are grant-aiding a project and refer the people concerned to the NDC the corporation will not be under any obligation to invest in it simply because the IDA supported it.
Is it possible that the three could be involved, the IDA, NDC and a private concern together?
Yes. The IDA will be putting in money on a different basis. They will be grant-aiding a company to do a specific thing, whether it is to acquire technology, to put in a machine or to undertake research and development activity while the NDC will invest in companies with a view to getting a profit and help in the creation of jobs.
Each clarification makes the position a little more confusing. Again, the Minister is putting the primary emphasis on investment.
I was responding to a question put to me. If one takes each sentence I utter in isolation and says it represents everything I am saying then, of course, one will be confused. I suggest to the Deputy that he look at my Second Stage speech and he will know where I stand.
We are on Committee Stage now.
This is the Stage where we go through the Bill line by line.
This does not have anything to do with the Bill.
I understand that on Committee Stage it is the job of the Minister to clarify the Bill line by line and not to suggest that we read his Second Stage speech.
If we do not make some progress there will be a lot of lines left without consideration when we reach 6.45 p.m.
I agree. Subsection (f) states that the corporation may invest in any enterprise involving the exploitation, development, production or marketing of natural resources, including agricultural, fishery or forestry resources. I must again refer to the Minister's emphasis that the job of the NDC is to invest enquity or venture capital unlike the IDA which grant-aids.
Subsection (f) refers to investing enterprises in those areas only, whereas under other sections the NDC are to manage and assist enterprises financially or otherwise and in other cases may establish an enterprise either alone or in co-operation with a State-sponsored commecial body. Presumably they can act in this way in this area also.
Yes.
The purpose of the amendment is to ensure that the NDC would do this on a planned basis. The IDA are engaged in this area. They have a separate food sector and presunably they have lots of ideas which they will be putting to the NDC asking them to invest in the various ventures. It will be new for the IDA to approach the NDC in the first place regarding any possible area of investment. Will it be the case then that the NDC will be reacting to prodding from the IDA or from any other quarter, or will the corporation have their own plan?
The purpose of the amendment is to ensure that they will know what they are at instead of reacting to what other people may request of them especially in the area of the revitalisation of the food processing sector. I am trying to ensure that the corporation would have a cohesive and co-ordinated plan but there is no such provision in the Bill. Is it the intention of the Minister that they would set out proposals for him as to what they intend doing about the food processing industry? There should at least be guidelines for them instead of legislating in a way that would result in their hopping around from one place to another.
The Minister made the fair point that we should look at this matter in the overall context but he is saying continually that basically the difference between the IDA and the NDC is that one can invest in equity whereas the other are involved in grant aid. The record will show that the IDA have taken and continue to take equity investment in a number of companies.
It is insignificant.
I could name the companies if necessary but the IDA do take equity investment.
Likewise, Fóir Teoranta.
On this whole question of investment an incorrect impression has been given throughout the debate so far. In some cases the IDA have taken equity shareholding to the extent of 15 or 20 per cent. It is being said now that we need the NDC so that they may invest in companies and the impression is being created that, while the IDA deal with the grants side, the corporation will look after the investing. Details of the companies in which the IDA take equity investment are to be found in the annual report. Why not ask the IDA to continue that process of equity investment?
Similarly, the IDA give loan guarantees. There was the case of CRH where they had an equity share holding which was paid back recently as we find from the annual report. Therefore, there is a grave contradiction in what we are talking about because the involvement of the NDC is to be similar to that of the IDA. One can instance Asahi in which the IDA have equity shareholding.
We are dealing with amendment No. 17 which relates to the food processing industry. The Deputy can raise those other points on the section.
This is a broad amendment. I fail to understand what this NDC are all about. Already we have Fóir Teoranta who become involved when firms are experiencing difficulties. There is a food processing plant in my area which is on the verge of closure but I am being told that as a result of the NDC there will be an exciting development there. Why can the IDA or Fóir Teoranta not take up that exciting challenge?
Why must we leave it to the NDC to revitalise the food sector? The more we read from the various IDA reports the more we realise how much difficulty will be encountered as a result of this Bill.
On the question of a comprehensive plan, it is intended that the NDC would broaden out into the area of trying to establish good corporate structures and trying to put together good management teams?
Is the Deputy speaking to amendment No. 17?
I understand that the point Deputy Mac Giolla is making relates to a comprehensive plan.
We are talking about the food processing industry.
But I take it that the main point of the amendment relates to a comprehensive plan rather than merely to the food processing sector and that Deputy Mac Giolla is suggesting that section 10, as drafted, is somewhat inactive and passive in its approach and that he is suggesting planning as an alternative. Is it within the brief of section 10 that the NDC should try to put together better corporate structures and better management teams? Obviously the other option is better worker co-operative structures. There is a danger that if the NDC merely sit and wait for projects to be brought to them, they will be waiting a long time and that, therefore, there is a need for a more active initiating effort on the part of the corporation. It is well recognised that the real lack is in terms of projects being brought forward, that this lack is even greater than the lack of venture capital.
The amendment before the House relates to the food processing sector but the Deputy is talking to section 10 in general.
The thrust of this amendment and of the previous one is to provide for a planning approach.
Amendment No. 17 deals with planning for the food processing industry.
I am sorry to have to reply to all this again.
It must be such a bore.
Deputy Richard Bruton was not here when we established that there was no plan.
Deputy Leyden has disappeared. I must explain again to Deputy Mac Giolla that there is a distinction to be drawn between the NDC planning their own investment strategy which of course they will do, and their being charged, as Deputy Mac Giolla is trying to provide for, with the job of planning the entire sector. That would be beyond their competence. It is a matter for the Department of Agriculture, for the IDA and for all the State agencies involved in that sector. I have no wish to lumber the NDC with the huge remit of planning everything in the food sector. Instead, I am anxious that they concentrate on certain investment opportunities, but they must approach that in a planned way.
Clearly, they will not simply wait for projects to be brought to them. They will consider the sector as a whole, identify certain niches where investment opportunities exist and seek out people already in that sector with a view to expansion. If the corporation should find that the people involved are not able to do the job, they would consider moving in themselves or perhaps putting together a consortium or using some other company, such as Guinness, for example, and asking them whether they would like to diversify into the area concerned with a view to putting together a project with the NDC and perhaps with some one else.
Planning for investment opportunities is different from planning for the entire agricultural and food sector, which the Deputy's amendment would ask them to do and which is a task which should not be given to them if we want them to be a lean mean investment oriented body rather than a big bureaucracy with pretensions to running everybody else's business except their own. That is the reason for not giving them too wide a remit.
Deputy Brennan pointed out that the IDA make investments and I had been making the point that it was primarily a grant giving body. The Deputy suggested by implication that it would be a bit incongruous to have both the NCD and the IDA making investments and taking equity in companies. It is not really incongruous, although it is one area in which there could be needless over-lapping. The type of investment or equity which the IDA take is in companies where they are trying to put together a financial package and they have gone five-sixths of the way and need another sixth to finance the project and bridge the gap. In that sort of situation, because they have exhausted all the grants available, the IDA may decide to take equity as well. That is not a desirable practice as a general rule, because the grant limits were set for a reason, and if they have been exceeded the IDA should ask themselves why it is necessary for them to take equity. It would need to be a very good project for the IDA to take equity.
I will be asking the National Development Corporation and the IDA to work out between them an operating agreement to clearly delineate the areas where overlapping might arise and lay down rules to avoid it. One area where this could occur would be in respect of projects where the IDA are considering taking equity. In so far as possible all equity investment should be left to the NDC and the IDA should stick to the grant giving activity. However, there will be the occasional case where the IDA will take equity. American companies do not seem to want the Government to take equity but Far Eastern companies tend to want the Government to take equity as an assurance of their welcome from the Government. Where, for instance, the IDA are giving grant aid to a Japanese company coming here, rather than referring the case to the NDC for their 10 per cent equity, there is no harm in the IDA putting in the equity. The power contained in the Industrial Development Bill should remain for that purpose. It is my intention to lay down clear guidelines to restrict the IDA from getting unduly involved in equity cases and to leave that to the NDC generally. I have ample powers available to do that, first through my approval of the operating agreement between the NDC and the IDA and through the powers I have to give directives to both bodies under relevant sections of the Industrial Development Bill. I have forgotten Deputy O'Keeffe's point.
We will get back——
My point referred to the IDA and the duplication in Avoca.
That is the same point and I have just dealt with it. To deal with Deputy Bruton's point I will refer him to section 10 (1) (h) where it is stated that the NDC will:
—assist... any enterprise engaged in the establishment, promotion, development or provision of marketing and related services to particular sectors of industry.
That essentially gives them a mandate to establish on a commercial self financing basis a type of shell company in the marketing field which might be useful for a number of small manufacturers to use, a joint subsidiary for marketing activity, where individually they do not have the resources to engage in marketing.
Is not the history of the shell company in the private sector diabolical?
The Minister is also getting into a full debate on section 10 rather than amendment No. 17.
The Minister did not answer my point.
Perhaps the wording is bad but the Minister has misinterpreted the purpose of the amendment. The amendment refers to a plan:
—for revitalisation of the food processing industry through profitable innovation by the State sector, the private sector and co-operative societies.
These are the three groups involved in the food processing industry. In the State sector there is the Sugar Company and what is left of Erin Foods, and then there are private enterprises and co-operatives. We need a plan for development projects in relation to those three areas. We should have a plan to develop areas which are not being developed or which are not being developed sufficiently, or for marketing.
The Minister indicated that he would insist that the IDA and the NDC would clarify a line of demarcation so that there would not be any messing about. That is part of a plan. I am glad the Minister will insist on that because the Bill does not force the NDC to make any arrangements with the IDA. I hope the Minister will also accept that some type of planning is essential at least to give the Minister an idea that they have in mind the same thing that the Minister has in mind for them. If the Minister would indicate that he will insist on some planning of that nature I will be prepared to withdraw the amendment.
The Bill does not indicate sufficiently that the NDC will be actively promoting projects and opening up new areas. The NDC have all these powers but they need some plan so that what they develop will last and will continue to develop of its own accord. They should perhaps get into a whole new area of the food processing industry which has not yet been touched. Some such plan should be put before the Government to indicate that the Bill will work. That is the only reason for the amendment. Those two amendments were on the same basis. The Bill was leaving the NDC to react to whatever happened, to various lobbies, and to invest in this, that and the other, whether it be in co-operatives, the private sector, the IDA, the State sector or whatever, all asking them to do different things with no plan, no guidelines on where they are going, when they would be hopping around in all directions. That is the only reason these two amendments were put down. Perhaps the Minister would indicate that he intends that that will not happen.
I would be quite happy to ask the corporation to place their investments in the food sector within a broad strategy which they would devise for their involvement in that sector, a strategy which would clearly have to take into account a broad scale development process for the food sector. Certainly I would not wish the corporation to be making entirely random investments without any conception of where they were going or what they were trying to achieve from a national development point of view. I hope that assurance is sufficient for the Deputy.
Amendment, by leave, withdrawn.
I move amendment No. 18:
In page 7, between lines 33 and 34, to insert the following subsection—
"(2) In carrying out its objects the Corporation shall have regard to its general duties under section 13.".
This is simply to meet the point made by Deputy Lyons and others earlier in the debate, to indicate clearly that, in carrying out their objects under section 10, the corporation must have regard to their general duties as set out in section 13. Deputy Lyons was concerned that all the activities of the NDC, as set out in section 10, should have the overall duty of creating the maximum number of jobs. That is achieved by this amendment. This amendment also ensures that, in respect of the fulfilment of all their objects, the NDC shall have a policy of realising their investments as soon as is financially and commercially prudent in such a manner as to enable them to earn a reasonable return on any investment made by them and to ensure that funds are available for the Revolving Investment Fund for Employment.
I understand what the Minister has just said. We are not now dealing with section 13 but the Minister referred to it. In my view, that is a totally unnecessary section.
We will deal with that when we come to it.
If the Leas-Cheann Comhairle will bear with me for a moment it is important to make a passing reference to it at this time because, bearing in mind the amount of amendments listed and the time scale involved, we may be unable to deal with section 13 itself. I agree with the amendment the Minister has included. But, when he refers to the general duties of the corporation under section 13, then my reservations give rise to comment like this. I am not at all happy that section 13, in itself, is necessary unless— and I will give this much — it is required for legal purposes. What we say in section 13 we have been saying over and over again throughout the Bill. Unless there is a legal requirement for the inclusion of section 13 — and I am not aware that there is such a requirement— I would contend that it is not necessary.
It is impossible to debate this amendment without serious reference to section 13 because it proposes that the corporation shall have regard to their general duties under section 13. If that is passed, therefore, section 13 is written in there. I respectfully suggest that the Chair take a lenient view because section 13 is clearly written in there.
I want to put one point to the Minister, and I do not want to appear to be splitting hairs about this. Section 13, which is referred to here, provides that the general duty of the corporation shall be "to carry out its objects, which shall include the realisation of investments..." My reservation is about the inclusion of the word "objects" there. The Minister should be crisp and clear in telling the House that that really means "objectives", that that is the aim of the corporation. One could read that: "to carry out its objects which shall include the realisation..." I am not a lawyer but I could foresee lawyers reading that phrase "to carry out its objects" as somehow suggesting that it was necessary, almost mandatory, certainly stronger than a wish that it would happen. I know that the word "objects" is used earlier in section 10 but in that case it is quite clear that the principal object shall be to do certain things.
In the context in which it is used here, it quite clearly says that it shall be the general duty of the corporation "to carry out its objects, which shall include the realisation of investments made by it as soon as is financially and commercially prudent..." I should like the Minister to be very clear for the record in assuring the House that that is an objective of the corporation, that the phrase as it is used "to carry out its objects" is not somehow suggesting that it is necessary or essential for them to do so. Obviously the Minister does not take the point——
What is necessary or essential?
In section 13 we see the phrase: "It shall be the general duty of the corporation to carry out its objects ..." I am saying we should be quite clear in this House that that means to carry out the objectives of the National Development Corporation, that there is no suggestion there that there is any mandatory requirement to do anything with it.
I should not like a general debate on section 13.
It is difficult to debate this amendment without debating section 13 as well. The way the Deputy might have read it more fully would be: "It shall be the general duty of the Corporation to carry out its objects... in such a manner as to enable it to earn a reasonable return on any investment made by it and to ensure that funds are available to the Revolving Investment Fund for Employment". The whole purpose here is to ensure that, in carrying out all the objects in section 10 the NDC shall do so in such a manner as to enable them to earn a reasonable return on any investment made by them, and ensure that funds are available to the Revolving Investment Fund for Employment.
Can I get the Minister to state quite clearly that there is no question of any mandatory requirement on the National Development Corporation to dispose of investments as soon as it is financially and commercially prudent, that it is merely an objective, an aim or a desire that they might consider that?
It will be their general duty.
Does that mean it is mandatory?
It is their general duty to do it, yes, but the timing within which it will be done is something that will be determined by them.
It is extremely important that we get this very clear and on the record. The Minister is saying that it is the general duty of the corporation to realise investments made by them as soon as is financially possible——
On a point of order, there is an amendment to section 13, amendment No. 20, which suggests the deletion of the word "shall" to be substituted by the word "may".
In view of the fact that there is an amendment on section 13 relative to Deputy Brennan's contribution, could we dispose of this——
I take your point, a Leas-Cheann Comhairle, but this is a very important juncture. What we are asking here is: do the National Development Corporation have to dispose of investments when it is prudent, or may they dispose of investments? I should like the Minister to tell the House that it is not legally necessary for the NDC to dispose of them.
I would remind Deputy S. Brennan that Deputy Mac Giolla has an amendment relevant to the very question he is posing.
Except that we are now talking about putting section 13 into the Bill, and I do not like the way section 13 is worded.
I do not like the way the debate is continuing on section 10. I know section 13 is relevant to section 10. I would prefer that we resolve section 10 and move on to section 13 because, as Deputy Lyons indicated, time is a vital factor.
I will bow to your wishes, a Leas-Cheann Comhairle. I just want to leave the question on the flood. I will come back to it again, because it is crucial: is it mandatory and legally necessary for the NDC to dispose of investments or is it optional?
The point is relevant, but for the reasons stated we may not get through this section. I think the Minister acknowledges that it is difficult to deal with a reference to section 13 on section 10 without addressing oneself to the amendment of "shall" instead of "may" or "may" instead of "shall". I have indicted that section 13 does not appear to add anything new to the objects of the NDC, and it reduces the sharpness of the Bill. I have no amendment down to it but I ask the Minister to consider scrapping that section.
This is amendment No. 18.
Yes. I want to make a point which, like the Deputies opposite, I cannot make without briefly referring to section 13. Section 13 contains in a position of prominence the expression "viable employment". I realise that Deputy Lyons put down an amendment which was discussed earlier in which he sought in section 10 to substitute for the expression "or providing viable employment" the expression "and providing viable employment". I am sorry that I did not hear what he had to say about that, but he might not have made the point that the word "viable" is not defined in the Bill and can mean different things to different people. The emphasis which has now been given to it by the Minister's amendment in which he, as it were, is piling one viability on a set of other viabilities, makes it important before we leave this section to get this absolutely clear. The apprehension in my mind is that "viable" perhaps in the minds of the Department and the Minister does not mean "viable" in the commercial sense but in some other impalpable and so far not yet discussed sense. I have that apprehension because in various clauses in the first subsection of section 10 to the expression "profitability""development", "expansion", "growth" and "providing viable employment" are mentioned disjunctively with the word "or" as though to suggest that viable employment can be there even though profitability is not. I hope the Minister can dispose of this and assure the House that what is intended is to define "viable" in such a way as to put it on a par with commercial viability, and no project would be commercially viable and the employment in it would not be commercially viable unless the project was profitable.
If the Deputy would look at the various clauses in section 10 which he is quoting he will see that the requirements are that the investments must be profitable and efficient or capable of becoming profitable and efficient and have resonable prospects for profitability, development etc., so "profitability and efficient or capable of becoming profitable and efficient" is a free standing requirement.
I am certain that that corresponds to the Minister's wishes.
It is what the Bill says.
However, the expression "or" in the last line of these subsection is a mistake because it places a question mark over——
Could we deal with the Minister's amendment, No. 18?
I do not think the amendment is really necessary. Section 10 lays out that "the principal objects of the Corporation..." and at the end of that the Minister wants to put in "In carrying out its objects..." and the objects are listed. The amendment reads, "In carrying out its objects the Corporation shall have regard to its general duties under section 13", which are to carry out its objects. The general duty of the corporation is to carry out its objects. That is in section 13.
No. The Deputy is not reading it. Section 13 provides that:
It shall be the general duty of the Corporation—
(a) to assist in the creation of the maximum amount of viable employment in the State, and
(b) to carry out its objects, which shall include the realisation of investments made by it as soon as is financially and commercially prudent, in such a manner as to enable the Corporation to earn a reasonable return on any investment made by it and ensure that funds are available to the Revolving Investment Fund for Employment.
There are two separate items in section 13.
The amendment states that:
"(2) In carrying out its objects the Corporation shall have regard to its general duties under section 13.".
Under section 13 the general duty is to carry out its objects. If section 13 were moved forward to follow section 10 it would serve the same purpose. I do not see the point in putting in an amendment which is already in the Bill, that the NDC's general duty is to carry out their objects, and then the Minister says that in carrying out their objects the corporation have regard to their general duties.
I do not know if I can explain it any more.
What is the need for it?
The need for it is to make sure that in undertaking the various objects that they have been given in section 10 the corporation have regard throughout to their general duty which applies in respect of fulfilment of all their objects which are set out in section 13, which are twofold: (1) to create the maximum number of jobs, (2) to earn a reasonable return on any investment they make. Those are the two general duties which apply to all the objects. Lest there be any doubt that in fulfilling their objects the corporation at all times and in respect of all their objects have regard to their general duty, we are putting in an amendment to make it absolutely clear in section 10 — a cross-reference from section 10 to section 13 — that nobody can say, "We are in accordance with section 10 so that absolves us from following section 13". We are making clear that in doing anything under section 10 we must comply with sectin 13. It is a system of cross-referencing to make sure that the thing is watertight and clear.
Amendment agreed to
I move amendment No. 19:
In page 8, between lines 15 and 16, to insert the following subsection:
"(5) Nothing in this Act shall be construed as enabling the Corporation to give grants to any enterprise.".
This is to make it clear that the corporation will not be giving grants. The term "assist" is used at different points in the corporation's objects and "assist" does not mean giving financial grants. It means making financial investments or giving non-financial assistance. In this amendment we have excluded them from giving grants. That would be designed to meet the general wish in the House that it should be abundantly clear that the NDC will not go into competition with the IDA or SFADCo in giving grants. They will perform a separate role.
I support that amendment because it is very sensible. I take it, though, that equity could not later be turned into a grant. That is implied in it.
No. Grants are out.
I concur that it is necessary to put that in. It will erase any doubts in anybody's mind. There were some expressions along those lines at the announcement of the setting up of the NDC by people speaking in favour and so on, that all this money was available. A figure of £300 million was being thrown about in suitable places, and they gave the impression that the NDC were another arm of the State handing out money like the IDA or the multiplicity of groups that we have. I am glad that the NDC are not such an organisation giving grants or aid in the way that people had conjured up in their minds.
I agree entirely with the thrust of this amendment. However, the corollary should not be enforced as strongly as the Minister seems to suggest, namely, that the IDA should never take up equity. He said that that might be the thrust of his directive about the arrangement between the NDC and the IDA. That would be dangerous. I see equity as being a useful vehicle instead of solely grants for an agency like the IDA, quite distinct from the NDC's role.
Amendment agreed to.
Question proposed: "That section 10 as amended, stand part of the Bill."
Before we conclude on section 10, when are we going to get time to amend it? This is the last opportunity because it will be guillotined at 6.45 p.m. I know it is by agreement and I accept that, but at this stage when we reach the end of section 10 it is time to stop and reflect on the first ten sections. It can be said that the first nine of those ten sections are for the setting up of the NDC and the tenth provides how and where the corporation will make their investments. From the words used it could be said that, apart from giving financial assistance, the corporation would appear to be given power to become involved in management. If that is the case, could it be said that the corporation will end up with more employees than the enterprises they intend to assist? We will come later to director-employee requirements.
If an enterprise ends up in the ownership of the NDC, will the corporation involve themselves in management and not just investment? Any such involvement by the corporation would qualify for Government grants and other State assistance — the Minister's previous amendment qualified that somewhat. Section 10 contains the principal substance of the Bill, and in it the corporation must be capable of funding new projects. Therefore, we must be careful how we address this provision. The corporation will have to be dynamic and they could play a catalytic role, particularly sensitive about new techniques and processing. That is desirable if the objectives as well as the objects of the NDC are to be achieved.
The section does not set out a predetermined time limit and when he is finalising the establishment of the corporation I hope the Minister will ensure that targets in relation to time will be set for the NDC. If we accept all the provisions in section 10, the corporation will be making large investments and it is therefore essential that a timescale and targets would be set. I am not so sure we have dealt fully with that aspect of the Bill.
The whole of section 10 deals with the principal objects of the corporation and I suggest that the drafting of section 10. particularly subsection (1), leaves much to be desired. I do not think anybody would hold out the first clause in the section as being a model of utility. I cannot understand the recurrence of the idea of profitability twice in two lines or three times in three lines. Paragraph (d) refers to "reasonable prospects for profitability, development, expansion, growth or providing viable employment".
At the risk of being tedious, I must repeat that the Minister is giving the impression that there is a difference between the third and the second legs of the criteria in section 10. The Bill should make it clear that the provision of viable employment is not something separate from profitability. I hope the Minister does not think that these clauses, because of references to profitability, are a clear answer in a most unlovely piece of drafting.
Paragraphs (c) and (d) have been amended.
So there will be a "profitability" clause in all of these paragraphs. Between now and Report Stage I suggest the Minister should look at this wording and ask himself if he is not leaving loopholes. He will be anxious to preserve such funds as the State will make available to the NDC, but is he not leaving it open to future Ministers to look for employment through some criteria other than profitability?
I agree that is the way the corporation should operate, but there is another thing about the section: it does not refer to the location of the enterprise which the corporation would be in business to assist. The Bill refers to enterprise, but the location is not mentioned. We could be anxious to invest in a foreign enterprise, like sending building or hospital staffs to the Middle East, which did not happen 20 years ago but which is now emerging. If I were the NDC I would want to know what the capacity would be for such enterprises. I would want to see that the legitimate object of the corporation would be beyond doubt. It is not excluded, but I wonder would the Minister put this beyond doubt. Perhaps I have overlooked something, but in case a doubt should arise about a foreign based operation in which Irish capital and staff would be involved, I should like to see this expressly mentioned.
The gist of section 10 is that the corporation will invest with semi-State companies and the emphasis is on getting into a business with State bodies. Under this Bill we are setting up a State enterprise to go to other State enterprises and ask about getting into business together. They in turn will set up a third organisation which will then do the business. Is it not the height of lunacy in a small country like this to be following such a procedure? If there is business there to be done, why do the existing semi-State bodies not do it, for example the ESB, Aer Lingus, Bord na Móna? There is no reason why such companies cannot look at a profitable investment, seek the funds and do the business.
There is the Aer Lingus work done through the Dunfey's Hotels and foreign investment. They did an excellent job of investing in subsidiaries and in profitable opportunities. Why do we lumber ourselves with a new organisation to get in touch with existing State companies of which there are hundreds, to set up a third organisation to create jobs? That could bring a chain reaction. It makes no sense for this economy at this time to be taking such an approach. I feel extremely strongly about that. It is at the core of this Bill and is very woolly and faulty thinking.
Section 10(e) mentions assisting financially or otherwise and managing or acting "as a holding company for any State-sponsored commercial enterprise established after the passing of this Act." In other words, the National Development Corporation can act as a holding company for any State-sponsored commercial enterprise established after the passing of the Act. Supposing the suggestion is accepted that we have a semi-State company to take over the Department of Forestry, as an example, because that suggestion happens to be doing the rounds, does it mean that under that section Forestry could be handed over to the corporation which would then act as a holding company?
I am not being devious in making this point but I am worried about it and it is important that the record should show that somebody made it. Under this section if the Insurance Corporation of Ireland, who at the moment are somewhere in Limbo-land, were formally to become a State-sponsored commercial enterprise, the corporation could act as their holding company. Why say that it could be a holding company for future semi-State companies? If the Minister does not mean as much as that, he should tighten up the section now. I accept what the Minister is saying, and his own intentions in this regard, but future Ministers could use the NDC as a holding company for all future semi-State companies under section 10(e). If he does not mean that to happen, he should take it out of the Bill.
Under Section 10(2)(e) the corporation might participate in partnerships. How is it possible for a limited liability company, which the NDC will be, to hold a share in partnership? Will that not be a difficult legal trick to organise? How can a limited company have a share in partnership if the partnership is not a limited partnership? I do not see how that could happen in the ordinary sense of a partnership. The Bill would suggest that the word "partnership" is used in the sense of, say, a firm of solicitors or accountants in partnership. The wording is much too loose and the Minister should amend it. Section 10 (2)(k) states that the corporation shall have power:
to make a loan to any enterprise provided that such a loan is not inconsistent with the provisions of section 15.
I do not want to discuss section 15 because the Leas-Cheann Comhairle would jump on me, and rightly so, but that section says that the corporation shall be empowered "to make no more than one loan to each enterprise in which it invests". That is also written into section 10, with reference to section 15. Is that not the height of commercial nonsense? One loan could be anything from £1 to £1 million. What is important is the size of the loan. I have never seen such a phrase in any legislation with which I am familiar. Some time later it might be discovered that there was a tremendous opportunity in that company and under the legislation they could not get another loan. Surely the correct thing is to put in the extent of the loan, which the Minister did before. He has written figures into Bills previously.
It is limited.
It could be one loan drawn down at different times but that is getting around it and why put in that paragraph at all?
With regard to section 10 subsections (3) and (4) I am not a legal person, but I see some danger in them. There are people more qualified than I to comment on some phrases used, but I ask for clarification.
The subsections are as follows:
(3) Nothing in this section shall prevent or restrict the inclusion among the objects of the Corporation as stated in the memorandum of association of all such objects and powers as are reasonably necessary or proper for or incidental or ancillary to the due attainment of the principal objects aforesaid and are not inconsistent with this Act.
(4) The Corporation shall have power to do anything which appears to be requisite to or which appears to it to facilitate the performance by it of any of its objects as specified in this Act or in its memorandum of association and is not inconsistent with any enactment for the time being in force.
In the subsections the following phrases are used "as are reasonably necessary" and "which appears to it to facilitate the performance by it of any of its objects". These are opting out phrases. The wording is extremely loose and dangerous. Some subsequent board of directors of the NDC long after our time could say that something was reasonably necessary or that it appears to be necessary to facilitate the performance of their duties and it is much too open-ended.
A Cheann Comhairle, it is a fairly——
I am sorry, but would it be possible for me to deal with the points which have been raised, as I have been getting a pile of them?
Deputy Kelly is also anxious to contribute.
It is right to say that the Bill is full of ambitious imagination. That is as I would see it.
Is this on section 10?
It is Section 10 is the anchor part of the Bill. That fund to create employment will accumulate from the sale of assets or investments which will be productive or successful is very difficult for me to believe because that situation has not arisen before in the semi-State sector. We have not gone into the public market for money for further investment. What does the Minister propose to invest in the first year of the setting up of the corporation? The amount is pegged at £300 million, but there is no initial suggestion of what the capital would be on day one. Is it £1 or £500,000? That is quite important.
We have seen many enterprise people investing outside the country and people have not got confidence in investment because the climate is not right. That is where the problem arises. The opportunities are not here because one cannot get a proper return on investment. Until we get all those things right we are in real trouble. The more often this is said the sooner we will come to grips with the problem. When we have the climate right for investment the system will work.
Deputy Kelly was concerned that there would not be sufficient emphasis on profit as an overriding requirement for viable employment. We have stitched this into the objects of the corporation in a very definitive manner. All the objects are subject to the overriding general duty that they must be carried out in such a way as to earn a reasonable return on the investment. A reasonable return equals profit. That is the first line of defence against unprofitable investment. In respect of every one of the subheads of the objects there is the requirement that the investment must be in an enterprise which is profitable and efficient or capable of becoming profitable and efficient. That stitches it in as clearly and definitively as one could ask. Those two provisions stand on their own and are not subsidiary in any way to the "or" that appears in any of the remaining clauses.
Deputy Kelly also raised the question of foreign investment.
Yes, I had forgotten about that. The general duty is to create the maximum amount of viable employment in the State. I do not think the corporation would set up companies that would employ people on a permanent or semi-permanent basis overseas. That would be outside their objects.
Invisible exports.
However, people working overseas for some of the year but paying Irish taxes would not be disqualified from being considered to be employed in the State. I do not think the NDC will be able to get involved in buying another string of hotels in North America. Aer Lingus can do that but not the National Development Corporation.
We should be careful not to rule out a development whereby the NDC would buy into a company largely operating abroad.
Deal with Smurfits.
The general duty is to assist in the creation of the maximum amount of viable employment in the State. If investing in something overseas indirectly but very clearly assists the creation of viable employment in this State, then it is probable that the corporation would be acting within their general duty. That is a matter for interpretation in a particular case. Certainly the NDC will not have the freedom simply to invest for profit overseas.
"If you had a pint of Harp..."
Does that satisfy Deputy Kelly?
Not really.
I thought I had satisfied him. Deputy Brennan was concerned about the requirement of acting as a holding company and asked whether this would mean that the National Development Corporation would be likely to be the holding company if a new State company were being set up in the forestry area. It is possible that the NDC could be used as a holding company and it is permissible under this section but in my view it would not be desirable. One is talking about setting up a company to run an on-going business, whereas the general thrust of the corporation should be to invest in new business. I explained that on one of the amendments where I saw this holding company power being used. Let us assume that the ESB, Údarás na Gaeltachta and the NEA are individually involved in fish farming or aquaculture. These three State companies are responsible to different Ministers. From the point of view of managing the State's investments efficiently it would not make sense to have an aquaculture expert employed in each of these bodies. It would make much more sense to transfer all the State's shares in these companies to the NDC where one aquaculture expert could probably look after all of them.
What about unemployment? Two jobs gone.
Efficiency is the best assistance to job creation. Job multiplication for the sake of multiplication is no use. That is the sort of situation where I would envisage this power being used. I would not be in favour of the NDC becoming a holding company for a large existing State company because it would sap the dynamism of the NDC into administration, crisis management and oversight in respect of a large existing operation, whereas the thrust of the NDC should be towards new investments, getting them up and running, getting out of them and setting up more new ones. That is the whole idea of the revolving fund — to maximise the effect of State involvement in industry by ensuring that it is constantly on the frontiers of technology and moving forward. Many of the people who debated this topic felt that because the NDC would be turning over their investment this represented in some sense a form of hostility to the State being involved. On the contrary, it represented a desire to ensure that if the State became involved it should do so to the maximum effect from the point of view of the amount of money it put in and thereby making State investment more constructive and productive in general terms. That essentially is the philosophy underlying the section which we are debating.
Deputy Brennan asked if this could be used to become a holding company for State shares in the Insurance Corporation of Ireland or an insurance company. The definition of "enterprise" in section 2 excludes banking, insurance, legal management consultancy, advertising, public relations and financial services, so the National Development Corporation will not be involved with the ICI.
I am glad to hear that.
It is out of order as far as this legislation is concerned. Deputy Brennan raised a very interesting point. He asked how could a limited company, the NDC, become involved in partnerships which are unlimited. I have to admit that section 2 is standard drafting and usually this list of powers is included in all Bills ——
Does the Minister mean that they are all wrong?
There are shelf companies and this is shelf drafting. It is unlikely that they will be involved in an unlimited partnership. Possibly they could be involved in limited partnerships which would still be partnerships under the law. I see difficulties in a body which are limited undertaking unlimited liability which is what would happen if they were engaged in an unlimited partnership. I cannot see how that could arise but, if there is a problem in that area, I have the power under the directives section to give guidance to the NDC as to how they might behave in this regard.
It might be impossible, as far as a limited company is concerned to have a share in a partnership and the Bill allows them to do that.
In an unlimited partnership.
It just says partnership.
Partnerships could include either limited or unlimited companies and they could obviously not do the impossible. They will perhaps do what is possible and limited partnerships are possible. If I had time I would look at the possibility of amending that in the light of what Deputy Brennan said regarding limited partnerships but I do not think I have the time to do that unless we have an oral agreement to put in an amendment here.
I think that is possible. If we put the word "limited" before the word "partnership"——
We have already amended section 10 which we are now debating.
We still have to vote on it.
It could be amended on Report Stage.
I suggested a change to the Minister and he has partly agreed to make some change. Is there a way in which this change can be made?
With respect to Deputy Brennan, the Minister would be ill advised to make a change off the top of his head. I should like to think about it and I am sure that any legal adviser would like to spend half an hour at the very least thinking about it. I do not think it is fair to ask the Minister to amend it in that fashion.
I can look at it on Report Stage and, if necessary, there could be an amendment in the Seanad. Unfortunately, that means it would have to come back to the Dáil which I would not be terribly keen on because of our crowded programme. However, if there is a genuine problem I should like to rectify it and I commend Deputy Brennan on his industriousness in discovering it.
The other point mentioned was in regard to loans and he seemed to be under the impression that the corporation were limited to giving one loan which could be as large as they liked. That is not the case and if he looks at section 15(3) (a) (i) he will see that the amount of the loan may not exceed 30 per cent of the initial investment by the corporation and the amount of the loan is limited by the total investment. The reason for not having the ability to put in more loan capital is that we do not want the NDC to become a bank or rescue agency constantly being looked to for more loan capital with the result that the balance sheet of the company is badly geared through more loans being made available by the NDC.
There are State agencies engaged in lending money to industry such as the Industrial Credit Company and, where necessary, Fóir Teoranta and if, subsequent to their initial investment, companies need loan capital that is where they would look to or to the national banks, not to the NDC. If it is such a marvellous investment they should not have any difficulty in getting the loan capital, but if they have to look to the NDC for a loan possibly there is something wrong with the project. You might then ask why they should be allowed to give a loan. I am advised that it is desirable in initial investment packages to allow companies who are investing to be given loans as well as equity. In respect of the initial package we are allowing them to give loans but not after that and subject to the limit of 30 per cent of the investment.
Deputy Brennan asked about subsections (3) and (4) of section 10. The memorandum will have to be approved by me. Subsection (3) says: "...such objects and powers as are reasonably necessary or proper for or incidental or ancillary to the due attainment of the principal objects aforesaid..." Allowing that that may be done, it is, however, stated that such additional material as might be included must not be "inconsistent with this Act." This Bill governs any flexibility one might have in that regard.
As far as subsection (4) is concerned, it is not quite as important because it simply empowers the corporation to do things which facilitate the achievement of their objects as distinct from adding to their objects. I suppose it makes sense to allow them to do anything necessary to achieve their objects as long as it is legal which the requirement is.
Deputy O'Keeffe referred to the revolving fund and seemed to be a little sceptical about it. I do not share this scepticism. I expect that the NDC will make a contribution to the revolving fund from a very early date. The revolving fund will be drawing from sales of assets but also from profits on existing investments. The NDC will inherit a portfolio of investments of £3.5 million made by the NEA and possibly by next year it could yield profits which could be paid into the revolving fund. That fund should be building up——
The NEA have been a very successful agency.
——almost from the foundation of the NDC and that is as it should be. The requirement to have a revolving fund is useful quite apart from the funds provided for investment. In addition, it provides an objective financial measurement of the success of the corporation and the officals. If the corporation do not build up a reasonable fund it is a sign they are not doing what they should so far as making profits are concerned. I am sure all Deputies will agree that profits are necessary for jobs. Some may argue where the profits should go but I think it is common cause in this House — presumably including Deputy Mac Giolla — that profits are necessary for job creation.
They are being divided in three different ways. From what the Minister has said — I hope he is right — the NDC will be so successful that immediately there will be money going into the revolving investment fund for employment. I am sure that would be appreciated by the unemployed. However, I am not sure that the future operations of the corporation are clear. For instance, are we talking about operating expenses after five years and for the distribution of profits if private investors are allowed to hold shares in the NDC? It appears that dividends will have to be paid to the Exchequer. The Minister spoke about profits but he did not say what share will go into the revolving fund. He also indicated another sector who would receive dividends from such profits, the investors. I should like to know if the criterion used will be how soon the NDC become self-supporting. It appears to me that five years is too short a period to allow adequate risk-taking in some areas.
It is a pity that there are time constraints on us in dealing with this Bill. We have not got half-way through Committee Stage and I know we will run out of time. The Government should be doing everything possible to create the right climate so that people will be motivated to establish businesses and to earn an adequate reward to compensate for the commercial risks involved as well as to earn a profit. Profit will provide the investment funds for expansion. If the Government did this it would be of more benefit than what is proposed here. Even as we go through the Bill on Committee Stage many problems are arising. I do not want to throw cold water on something that has not even got off the ground. In all honesty I must say that I do not think the NDC will ever get off the ground and the more we consider the matter here the more convinced I become of that.
The revolving fund is very important. It is not indicated what criteria will be used to ensure that profits from enterprises will be channelled into the revolving fund for the specific purpose of creating more employment. Will the Minister please elaborate on the revolving fund?
This is governed by section 31 (2) which states:
The Minister may, from time to time, with the consent of the Minister for Finance, direct that the profits of the Corporation, in any year in which a directive is made under this section, be applied in such a manner as may be specified in the directive.
It is my intention that in the early years the profits will be paid into the revolving fund for employment so that the NDC will be able to make more investments. It is possible under section 31 (2) that the Minister would direct the corporation to give the profits over to the Exchequer. However, I do not envisage doing this in the early years. I think it desirable that the corporation should build up a reasonably healthy revolving fund.
The Minister has again used the word "direct", as he did this morning in another context. This morning we were not happy with an amendment that used that word but from what he has said now it appears that under section 31 he will be able to direct over the profits to the Exchequer. The Minister cannot have it both ways.
The amendment in the name of the Deputy this morning implied I would direct them in respect of individual investments and I was concerned about that. Section 31 states that directions may not be issued in such a way as to affect individual investments.
The drafting of this section is lamentable. The reason is that two hands have been at work on this section: the hand of Esau and the hand of Jacob are visible in it. I suspect these clauses were in draft when perhaps a politically coloured voice was heard, or a new element arrived on the scene, which necessitated the glueing to the ends of these clauses of a further few lines and this has disqualified the entire section from earning any prize for elegance in draftsmanship. What Deputy Wilson would call the caesura comes after the word “efficient”. That is the point at which Esau left off and Jacob took over. The clause, as originally and reasonably drafted, read “which, in the opinion of the corporation, is profitable and efficient or capable of becoming profitable and efficient”. Then somebody in the Department said that will not do, it is far too hardheaded, capitalistic sounding and so on. They said they would have to put in another two lines of waffle which will read “and has prospects of profitability”. Those words were put in in such a hurry that the tautology implicit in repeating the same criteria in the next line did not occur to anybody.
Then we have "development, expansion and growth". For the extra 10 per cent we used to get for doing amhránaíocht in the honours leaving certificate, would somebody tell me the difference between "expansion, development and growth"? Is one not the same as the other? This is only padding intended to divert attention from the real point, the sneaky sub-criterion of "the provision of viable employment". That is in section 13, and why drag it into the clauses in this section? I do not want to weary the House or the Minister with this, but I would ask him to look at this as a piece of legislation in respect of which he has to share responsibility with 167 other Deputies, and he should ask himself, if only for the appearance of the thing, how the section could be cleaned up, and if not, why not?
My next point bears on his intelligent comments on my query about whether enterprises situated abroad would have a claim on NDC interest. He said that if I was suggesting that the NDC should get into foreign enterprises which would also be foreign manned very largely, he could not see the virtue of putting public money into such enterprises. Neither do I. The Minister instanced a chain of American hotels. I am not suggesting any such thing. The American hotels which Aer Lingus rightly or wrongly went into are staffed by Americans with, possibly, a small module of Irish management or linkage between the American management and Aer Lingus, but basically no employment worth talking about is provided for Irish people through this dimension of Aer Lingus operations. Though direct employment for Irish people is not provided, I have no doubt that those hotels serve a certain purpose in promoting Aer Lingus services. In other ways, I am sure, they provided other advantages to the Irish economy.
What I am suggesting is that, without striking anything out of section 13, which refers to providing employment in the State, a small subsection might be included providing that the section did not prevent the NDC from getting involved in enterprises a large dimension of which would be the provision of services abroad in which Irish people would be employed. Surely a job for an Irish person outside Ireland, particularly if he is earning money for the Irish economy, is as good as one here.
Is this more of the fetish about emigration that is damning us all? Is this more of our superstition and taboo about it? I remember when the late Seán Lemass was being praised here, and rightly so, for talking about merchant adventurers. He wanted Ireland to do something which it had never done before, namely, to spawn and throw up a race of merchant adventurers. How can you be a merchant adventurer if you stay down at the end of your own boreen? You have got to get out, as the English did, as the Dutch and the Portugese did, as all large trading peoples have done who were confined in a small geographical area not very highly advantaged, people who were driven out of their countries, so to speak, in order to make their living and in order to spread the influence and credit of their countries elsewhere.
How did the British exploit India for a couple of hundred years? It was through the East India Company. Naturally, I am not suggesting anything like exploitation: I am merely saying those people did not do it by staying at home. They got out and worked in other countries because there was not work for them to do at home. This is such a fetish here that it is a political mortal sin to suggest it. I think the sin is the other way around because it is wicked for politicians to keep this fetish alive. I do not believe the Minister is guilty of it. For all I know, he may secretly share my opinions about this matter. It would not worry me one way or the other, but if what is behind his objection of the idea that the NDC ought to be put in a position that would give them some discretion about supporting Irish firms employing Irish staffs abroad, he would be doing a good and imaginative days work if he reconsidered it.
I accept that the drafting of section 13 as it stands confines the employment which it is the duty of the corporation to promote to employment within the State. I cannot see the sense of that. If we were able to put together a health care package which would involve the employment of Irish doctors, nurses, anaesthetists and so on, and sell it somewhere in the world, in toto, that would be something the NDC could very well get into. I cannot see why they should be excluded, as they obviously are if we accept section 13 as it stands. It is no use the Minister saying that as long as they remain within the Irish income tax net this could be considered. I do not see the relevance of that suggestion. You cannot run a concern on the basis of going out for the odd weekend or for a few weeks or months. People have to expect to be out of the country for solid periods and regard the other place, even if only for a few years, as their home. I do not want to waste the time of the House on this, but I urge the Minister not to tie himself down in this regard, to put in a little subsection on Report Stage which would give at least a degree of discretion so that Irish manned enterprises can be assisted outside the country.
Section 13 is phrased in a very general way. It provides that it shall be the general duty of the corporation to assist in the creation of the maximum number of viable jobs and the maximum amount of viable employment in the State. That does not specifically exclude health packages. Indeed, the Deputy may be surprised to know that the NEA have established a body to do precisely what Deputy Kelly is advocating, namely, to sell health packages in the Middle East. I do not see that being struck down by this legislation.
However, if we were setting up companies which would be expected to function permanently overseas and employ Irish people who would remain overseas permanently, that would be outside the remit of the NDC. People who would be overseas for a short period and in respect of whose work the profits would be repatriated with themselves, would be within the NDC remit. I suppose it could loosely be described as the service export business. I have no fetish about that. Indeed, I agree with Deputy Kelly that some of the best entrepreneurs in Ireland are those who spent three or four years overseas and who came back with some of the cobwebs sucked out of their heads and the inhibitions and inverted snobbery about what one should and should not do knocked out of them by working overseas. That is not emigration. It is useful, relevant work experience to prepare people to achieve the fullest potential they have, and achieving it within this State. It might be better if they did not have to go, but I would not exclude it.
Which section are we on?
We are on section 10.
I would not have known it.
If the Deputy had not made a Second Stage speech a few minutes ago which could have referred to almost any legislation with anything to do with the economic activity, I could understand him. I am only replying to Deputy Kelly.
Will projects set up under the NDC qualify for grant aid from the IDA and FEOGA.
I have answered that question at least once in Deputy O'Keeffe's presence and about three times since the Bill was introduced. The answer is in the affirmative.
Question put and agreed to.
SECTION 11.
Question proposed: "That section 11 stand part of the Bill."
Does the Minister envisage that the managing director will be appointed from the Civil Service or will someone be sought on the open market to fill this post?
That will be a matter for the board. It would be my intention to advise them that they should try to obtain the best person possible for the job, that in that regard they should seek someone from wherever possible and not necessarily from within the State. It will be of vital importance that the staff be well selected.
The articles of association will provide that the number of directors will be nine but the Minister will be aware that there is a danger in providing for such a large number of directors. That is the danger of the board becoming a representative body with one organisation seeking to have two representatives on the board, another seeking the appointment of their person and the Minister nominating his two people so that we could end up with a kind of parliamentary assembly.
A patchwork quilt.
In that case the involvement of people on the board would tend to be the protection of the interests they represented as opposed to furthering the corporation. This is a problem encountered in all State companies but perhaps on this occasion we could endeavour to ensure that the board are comprised of a group of people fully committed to profitable investment in employment and leaving aside the interests they represented. I appreciate that this can be very difficult to achieve in a small country but we must at least make the effort. The people appointed should not be representative. They should be included because of a proven track record and ability.
The section seeks to provide also that the period of directorship shall not exceed five years. On a few occasions the Minister has made the point that the corporation should be at the forefront in respect of technology but the frontiers of technology today change every couple of months. We will not talk about Mostek, for example, or organisations like that but in reply to a parlimentary question on this subject the Minister told me that because technology was changing so quickly one had to be considering continually those changes. In that context I am wondering whether a five year term of office for the board makes sense. Might a three year period not be more appropriate? Five years may be too long in the context of ever-changing technology.
Paragraph (d) of subsection (2) provides that the remuneration of the chairman and directors shall be determined by the Minister with the consent of the Minister for the Public Service. There is no need to remind the Minister that we have a very good band of people serving as directors of our State companies. That has been the case for many years but some more rational way of remunerating them must be found. I know the Minister is concerned about this question but I am urging him to give it consideration in terms of this Bill. If the remuneration is to be determined by the Minister with the consent of the Minister for the Public Service we will not be likely to find the kind of determination and dedication that will be required from the directors of the NDC. We must move away from the couple of hundred of pounds a year regime and move into a whole new concept of compensating and attracting the best possible directors of State companies.
Paragraph (e) of the same subsection is one on which I have a strong point to make. It is not my intention to be political because that would not be the spirit in which this Committee Stage is being debated but the provision in this case is a recipe for all kinds of trouble in the future. Goodness knows who the Minister will be when there is a row about this provision which is that the directors shall, with the consent of the Minister, appoint a managing director. We should change that paragraph because to give the Minister the veto in respect of a particular appointment in a semi-State company is to repeat the kind of difficulty we have had for too many years. This Bill affords us an opportunity to move away from that practice. Why should we not take our courage in our hands and provide that the directors shall appoint a managing director? Can we not do that this once? We should allow the board of this semi-State company to appoint their managing director, to set the terms of reference and income and to hire or fire that managing director as they see fit. This is a crucial point.
I wish to refer briefly to subsection (4) of section 27 which impinges on section 11 and which provides that the Devlin recommendations will apply to the role of the chief executive of the NDC. This is a straitjacket that we should avoid from now on. Again, why not on this occasion provide for the directors to appoint the chief executive on the basis of a two or three year term of office thereby ensuring that the directors would have to review the appointment on a regular basis? If the Minister has difficulties he can remove the directors but why should he interfere with the appointment of the chief executive? There is no need to tie in the appointment with the Devlin pay guidelines because if the chief executive is to make the right decisions, if he is to make that extra effort needed to effect a contract, if he is to make that trip to China or elsewhere, or if he is to work that Sunday to achieve the desired result, it will be important that he is in a position to deal with the board on his own terms and that they can agree his terms of remuneration.
There is no sense in providing for the Minister having the final say in relation to the chief executive and allowing the State apparatus to have the final say in his salary. Let us put our faith in the board and trust them to appoint a chief executive and to decide whether to pay him the salary they consider he is worth, whether that be £5,000 or £50,000? Why once again in the case of this new organisation should we tie ourselves to something that has been shown clearly in the past not to have worked very well? This is a real opportunity to make a break with the past and that is why we should delete the provision that the directors shall, with the consent of the Minister, appoint a managing director.
I support Deputy Brennan in his argument that the terms of remuneration should not be referred to the DPS because that would be very restrictive for the chief executive of a company such as the NDC who will be expected to break exceptionally difficult new ground for the State sector. That would apply to some of his senior executives as well as to the chief executive.
In relation to subsection (f) which says the Minister for Finance will approve the appointment of the auditor, since the Minister for Finance will be a shareholder in what has a certain parallel to a venture fund, would it not be more appropriate to have auditors separate from the NDC? I understand that in the case of funds established in the private sector there is an auditor for the company who presents the company's accounts and there is also an auditor for the owner of the fund whose prime interest is the protection of the funds tied up. As an item of control for the taxpayer as shareholder in this company, would it not be more sensible to have a separate auditing function done in that way?
I was not finished when Deputy Bruton got in. I agree with Deputy Brennan that the board should have the right to fix the remuneration and salary of the managing director. One must pay for ability. All people are not equal in that some have more talent than others. This is one of the problems that has bedevilled the semi-State sector — ability is not being paid for. That must be taken into account. The restriction that the Minister for the Public Service has the right to veto the salary is not good enough. We should move away from that. The Minister would be wise to delete that section from the Bill.
In relation to directors, remunerations and semi-State bodies, a semi-State body director receives a taxable income which at the end of the day is only a pittance. We are told about the lack of commitment of directors of semi-State bodies. In the future we must look to a different type of director and we must get people with a proper approach to the business.
The whole area of directors' remuneration should be reconsidered and we should do that in setting up this new corporation. The Minister is aware of the problem and he knows that managing directors should not be tied to the public service.
Another problem is that in recent times civil servants have been appointed to semi-State boards and we have also appointed managing directors as company directors. Those are areas about which I have reservations. The managing director should not be a director of the company because, when it comes to a crucial decision, his independence as a director of the company is impaired by his job as managing director. The managing director should be the managing director, assisting the board. Recently there has been the appointment of civil servants to the boards of semi-State bodies. That is a very serious impediment to the working of a semi-State body because civil servants by nature are conservative and they have a narrow outlook.
They are not necessarily. It depends on the civil servant.
Civil servants work mainly in the interests of the Minister and if something ambitious or risky is involved they will consult the Minister and this might take from the efforts being made. We are all talking about ambitious projects. If there was a conservative civil servant on the board, that might retard progress. It seems to be the policy of this Government to appoint civil servants to all semi-State bodies. This will be a very serious impediment which will retard the success of the NDC.
Deputy Tomás Mac Giolla.
Would Deputy Mac Giolla mind if I got in? I have to go over so much ground that I will have forgotten it and the Members involved may even have left the House before I reply. In reply to Deputy Brennan, I do not intend the board to be representative. They will be selected solely on the basis of competence, but they will be committed to making the thing work. I do not agree with Deputy Brennan that three years would be reasonable. I know technology is changing but, on the other hand, the assessment of the type of project which will be coming before the NDC is something on which directors will build up expertise through time. If they were to be thrown out after three years and new people brought in, unless they were people who came directly from another activity where they were doing almost the same work, they would spend the first year learning the ropes. To get rid of directors who have been properly operative for two years only, taking into account that they would have spent the first year learning the ropes, would not be the wisest course of action. The five year period is better.
I take the point made by a number of Deputies about terms and conditions for managing directors. I draw the attention of Deputies to what I said in my reply to the Second Stage of this Bill:
Deputies may rest assured that the Government intend to recruit a person fully qualified and competent for the job. The fact remains that the actual salary rate, terms and conditions of this appointment are matters for determination between myself and the Minister for the Public Service. The NDC, however, did not exist when the review body examined the remuneration of the chief executives, and clearly the appropriate level of remuneration for the NDC post will have to be considered in the light of the particular requirements of the position.
That takes the NDC out of the Devlin straitjacket and says that the post will have to be considered in the light of the requirements of the position on the basis that it was a job that did not exist when Devlin was setting down his standards. Of course account will be taken of the Devlin requirements but it will not be subject to any rigid requirement following Devlin. That is the position. The determination of terms and conditions of employment in the NDC is really something for the directors in the first instance. The directors of the NDC should look at the possibility of devising a remuneration package which contains an element of relationship to the success of the investment made by the corporation, or alternatively the success of investments for which certain project officers were responsible.
This will be extremely difficult to devise. The full fruits of an investment might not be seen until the person in question had left the NDC and there would be difficulty in devising a scheme to take account of that situation. I invite the directors of the corporation to be as innovative as they can in making suggestions. Perhaps some of their suggestions will not be accepted and perhaps, if the directors act on the suggestion I am now making, when they get down to looking at the detailed operation of the scheme they may well decide not to consent to it. I should like the directors of the corporation to be creative in the way that they devise their packages for approval — as I think Deputies on all sides would agree — so that we can get the best possible staff. Clearly one way of attracting people and motivating them in their work would be through some means of relating salary to the performance of the investments made for which the staff are responsible.
Deputies S. Brennan, E. O'Keeffe and, I think, Deputy R. Bruton, were concerned about my consent being necessary for the appointment of the managing director. After all, he is a managing director and director, as such. The Government and I are responsible for the corporation and, hence, should have responsibility for the directors, including the managing director. Therefore, it is reasonable that there should be such control. On the other hand if it was the chief executive of the board of directors we were appointing, that would be a different matter. But, once he is a director, the shareholders must have a say over who the directors are, all directors, not just eight out of the nine.
Does the Minister intend to appoint him a director as well as managing director?
Once appointed he will become a managing director.
Yes, but that does not give him a voting right.
It does give him a voting right.
As one of the nine.
He will be a director. He will be one of the nine.
One of the nine?
Yes.
So it would be eight plus one, then?
Yes. I can see a lot of sense in what Deputy O'Keeffe was suggesting. Obviously one is balancing a number of different factors here in trying to reach a decision on a matter of this kind. There are strong arguments against having the chief operating officer of a company also a director of it. I think clearly Deputy O'Keeffe would agree with that and, in many contexts, I would agree with him. However, in this situation — to ensure maximum cohesion between the executive, the directors and the board — the case would be broadly in favour of the provision that we have. That is not to say that I do not acknowledge that there are arguments against.
To revert to the question about whether there should be a civil servant on the board, I have not made up my mind at all whether there should be a civil servant on the board of the National Development Corporation. Certainly I would not think there would be any sense in having one, at the most, and I am not sure that there should be any. However, I would say — whether this would apply to the National Development Corporation is doubtful because the corporation did not exist at the time this recommendation was made — the National Planning Board considered this matter and said that it was a good idea to have a civil servant on the board.
My opinion about this is — and this is based on three and a half to four years experience when I was responsible for boards as well as finance — that Civil Service directors are useful in many cases. First of all, they are full time and can devote much more time to the task than a part time director. By their presence on the board they overcome misunderstandings which might arise between the parent Department and the corporation. Such misunderstandings can be sorted out informally without the board ever getting into a sort of confrontation position with the Department on some point of principle which really, when one gets down to it, is not a point of principle at all. A director sitting in there, who is also a civil servant, who knows what is really worrying the Department about a particular course of action can tip off the other directors and say, "Look, we know what you want, if you do it that way, probably you will run into difficulty. If, on the other hand, you approach it this way you will have no difficulty". All that sort of thing can be sorted out within the board without getting into the sort of difficulty that sometimes can arise when the chairman sends letters to the Minister requesting a meeting with him and the Minister cannot see him because he is tied up in the House, has to go to Brussels or is doing this, that or the other and there arises a sort of impasse about some matter which could go on for weeks because people get themselves into positions without really understanding what the other person is concerned about. My general experience is that, having a civil servant on a board, can get around that type of difficulty.
I am not so sure that those arguments apply quite so much in the case of the National Development Corporation as they would in the case of other boards because the NDC are being given a very discreet task of getting out into the investment area and they will not have to come very much into conflict or even contact with the Department to that degree so long as their overall operational results are all right. Therefore, the argument I have advanced for Civil Service directors may not apply with as great force as it would shall we say, to a company like Irish Steel Limited who clearly were dependent on equity from the State or, shall we say, a board or body who are spending public money like the IDA. There is a stronger case in that type of situation than in the case of the NDC where the Minister's role is more limited because the statute says it all and it is a matter for the directors to get on with it.
Perhaps if Deputy O'Keeffe had had the experience I have had the privilege of having over the last three and a half years of dealing with Civil Service directors on boards he might not be as hostile to the idea. People who express themselves sceptically about this — and I can assure Deputy O'Keeffe that they are not all on his side of the House — usually are people who have not had the experience of being responsible Ministers for State companies. Probably the strength of their views is in inverse relationship to the experience they have had of actually dealing with practical problems of State companies. I found that to be quite a useful arrangement. However, I am not going to do it in the case of the NDC. I would tend to move in the opposite direction in general because the NDC is different from the average State company.
Deputy Bruton suggested the idea of a separate auditor, if you like, representing the shareholder as distinct from representing the board. I am not sure how necessary that is. First of all, the corporation will be involved in setting up companies and each of these companies will have their own auditor who probably will not be the corporation's auditor. Therefore one will have the corporation's auditor and the individual company auditor looking essentially at the same material. To come along then and have a share-holders' auditor, as distinct from the corporation's auditor, which in many cases might be a third auditor——
He is not a general auditor?
He would not really audit individual accounts to the same degree. I am not adverse to the idea of having somebody standing back from the corporation. But I would point out to Deputy Bruton and others that I have, at an advanced stage of preparation, a Companies Bill with 150 or more sections, a large part of which will be concerned with new responsibilities for auditors in general — and this would apply to auditors of State companies — where they will become, to a greater degree, protectors of the public good as distinct from servants of their employers, namely, the company. That sort of distancing of the auditor from the company — which will apply to private companies as well as to the NDC and their subsidiaries — probably will go a good way to addressing Deputy Bruton's concerns in that regard.
May I appeal to the Minister to endeavour to be somewhat briefer because time is rapidly running out? I want to make a couple of comments on this. The Minister spoke at some length but he did not give us any real idea of what would be his concept of the directors. I quite agree that there is no point in having directors with particular interests. But, in the context of development, surely the Minister will be considering and probably will have his own concepts about the direction in which he thinks the corporation should go and which will be reflected in the directors he appoints.
The Minister should have different areas of development in mind in the employment of directors. If you appoint somebody from the heavy engineering and construction area he will not be the slightest bit interested in fish processing or something of that nature. The areas that the Minister sees as requiring development and having the greatest scope for it would be surely those in which he would like to appoint directors with those interests, be it food processing, forestry or whatever and, most essentially, the marketing area. I thought the Minister would outline some of his ideas on the appointment of directors. He did not do so and I hope he will. I have no objection to one civil servant; that might be a good thing; but I am particularly interested in ensuring that the fish and food processing area and the marketing area are included and that we have directors who know their business in there.
I want to confirm something in my mind. The Minister can appoint eight directors, the chairman and seven, and they appoint a managing director. I presume the maximum the Minister can appoint is eight, but he can appoint fewer. Presumably he can appoint three or four directors, a chairman and three, or a chairman and four or five, and let them go ahead and appoint their managing director. If the Minister feels at a later stage that there is another area into which he needs to put somebody he would still have one or two to appoint. I would like the Minister to confirm that that is the way he is thinking, that rather than putting in all his eight appointments in the beginning he would appoint, say, five and the chairman and let them appoint their managing director, and leave a couple over whom he can appoint later.
The Bill allows the Minister to appoint directors for a period of three years. It provides for not more than five years, so he does not have to appoint them for a period of five years. I am opposed to appointment for just a period of three years. That would not give them scope or opportunity to do the job they are put in to do. Let us be realistic and accept, as in every other board, that these will be political appointments and when a new Government come in they will be ready to shift them to put in their people. If the Minister makes it three years they will be shifted with every change of Government, but if he makes it five years there is a very good chance that they will outlast the next change of Government and will have a decent period of office.
I am quite shocked at what the Deputy is saying.
I am against the three year period because it means constant chop and change with different political viewpoints coming in on the board. The five year term gives an opportunity to have a more solid board.
I cannot let the Minister go on to two points. One is the question of Devlin. I accept the Minister's good wishes, but good wishes are different from legislation and here we are passing legislation. His good wish that the chief executive might be rewarded in some reasonably commercial way with a percentage of good investments or whatever is the right kind of thinking, but section 27 (4) of the Bill provides that:
In determining the remuneration or allowances for expenses to be paid to its officers or servants——
——who would include the managing director——
——or the terms or conditions subject to which such officers or servants hold or are to hold their employment, the Corporation shall have regard either to Government or nationally agreed guidelines which are for the time being extant, or to Government policy concerning remuneration and conditions of employment....
In other words, there is a requirement in the legislation for the corporation to have regard to nationally agreed guidelines. If you write that into legislation and the corporation say they are going to pay this person £X,000 because he is doing a superb job, somebody can point out that that is a long way from nationally agreed guidelines and it could prevent or frustrate the wish of both the Minister and the corporation. I do not accept that this is tied to Devlin. I take the Minister's point that this is being set up, as it were, after Devlin, and therefore it escapes to to that extent. If the Minister really wishes to escape Devlin in regard to the NDC we sould make it clear and say it in the Bill. The opposite impression is given in that section in the reference to nationally agreed guidelines. That would pin down the corporation and would prevent the chief executive being paid anything above nationally agreed guidelines.
Secondly, I listened very carefully to the Minister's reasoning, and I do not accept it, in regard to the question of appointing the managing director. He said something to the effect that because he is a managing director rather than a chief executive, therefore he is a director, therefore the Minister must appoint him, because he is a director as opposed to being a chief executive who might not be a director. If that is the only reason, there is a simple way around it. The board appoint a chief executive and the Minister appoints him a director. The Minister appoints the nominee of the board a director of the company. That gets over the problem. Now the board appoints their own man and the Minister simply rubberstamps it.
Suppose I decide not to appoint him a director?
There are plenty of examples——
You could have an impasse.
——where representatives are put up and the Minister appoints the person. If the board appoint a chief executive I have no doubt that any Minister would be prepared to appoint that chief executive to the board. That gets over the difficulty. I suspect that is not the real reason why the Government are not prepared to let go the question of the consent of the Minister. It is crucial that in this semi-State company the chief executive, managing director, or whatever you call him, is appointed by the board without any say so from the Minister of the day. The Minister should have no say in the appointment of the chief executive. We should take our courage in our hands on that.
It is obvious in all of this Bill, but particularly this section, that the managing director will be the real driving force behind the corporation in that he is the one person who appears to have a permanent post. I would not go along with the suggestion of a three year period for the directors. Deputy Brennan proposed that the Minister should allow the board to appoint the chief executive, who will be the person who will be operating as managing director or whatever. He will be there as chief executive and much will be required of him. In a true sense he will be operating on a continuous basis. Why not remove the tradition of the Minister's consent? The person we will be requiring as the chief executive or managing director of the NDC will have to be the best available, and it would be totally wrong for this Bill or the Minister to put constraints on the board employing the most available, most suitable chief executive. Are conditions to be tied into this section as the Minister is suggesting regarding the rate of remuneration and so on? Section 11 (2) (e) provides:
The directors, shall with the consent of the Minister, appoint a managing director on such terms and conditions as shall be approved of by the Minister after consultation with the Minister for the Public Service.
There is a grave danger, as has been indicated by Deputy Brennan, that tying in restrictions on the remuneration conditions of the chief executive might not give us the best available person to operate as chief executive or managing director. The Minister should consider removing that anomaly.
It is unlikely that we will reach section 15 and the amendment in which I was seeking a limit of £150,000 invested in any one company so that the funds could be zoned in on small firms. Will the Minister consider in regard to the nine appointees appointing at least two from the small business sector? What will happen to the personnel, the chief executive and so on of the NEA if that body are to be subsumed by the NDC? Will we get involved in costly hand-shakes, compensation and redundancy payments or will there be a smooth transition? I have in mind the chief executive of the NEA. I want to know if we can agree not to get involved in costly compensation. There should be an expeditious and amicable transfer from that agency to the corporation.
Deputy Mac Giolla made some interesting suggestions about the way we might go about appointing the board. It would be my intention that it should be a multi-disciplinary board in so far as possible though there will be sectors that will be left out no matter what. We will have to rely on their good judgment and commercial sense, that they will be able to understand opportunities in sectors outside their own. I agree with Deputy Yates that it is desirable as far as possible to represent different sizes of businesses, including the small business sector. I hope the NDC will invest substantially in the small business sector. Under section 31 I have power to give them directions to do so. If I discovered that the NDC were being unduly biased in favour of large businesses I would not hesitate to use my power in that regard.
Deputy Mac Giolla asked if the appointments would be political. They will be political in the sense that the Government of the day are political but it is not my intention to draw people from any particular affiliation or no political affiliation. I hope to have a reasonable cross-section of competent citizens appointed to this body, people who will be committed to making it work. If Deputies opposite want to suggest names I can assure them that they will be considered. I do not want to have the board appearing to be one-sided in a political sense. That would be most undesirable. It has not been my approach in the appointments I have made.
Hear, hear, but the same cannot be said about some of the Minister's colleagues.
Occasionaly I appointed people who were political supporters of the Government and I do not hesitate to admit that but so also have the other side. If Deputies opposite want to suggest names I sincerely invite them to do so.
Deputy Brennan mentioned restrictions and referred, correctly, to section 27 (4). I must point out to him that that provision is designed to prevent increases in pay above the national norm although it could be used to set the salary. However, it is really designed to prevent the MD of the NDC, or some staff in the NDC, getting a 40 per cent increase in pay when the Government pay norm is a 3 per cent increase. That would be undersirable because it would burst a Government's wages policy.
Unfortunately it does not say that.
I am aware of that but that is the intention. As far as the setting of salaries is concerned I must point out, as I mentioned earlier, that it will not strictly come within the Devlin rules and it will be looked at by the Government in determining the pay level of the managing director in the light of the requirements of the job. In a response to earlier interventions I invited the corporation directors to be as innovative as they can in suggesting remuneration packages so that we can get the best people in the most innovative way.
The first task of the board will be to look for a managing director and in so doing I expect them to come up with recommendations about remuneration. It may be that they will want to have a remuneration package approved by the Government before they start talking turkey to candidates. I hope there will be a constructive discussion between myself, the directors and the chairman on how best to go about this. It will be my intention to get the best person and pay him or her the necessary amount.
Why did the Minister go for the title, managing director, rather than chief executive? I take it that the board will appoint the person and it will be up to the Minister to decide if he or she is considered suitable. The Minister said that a civil servant appointed would be useful and would be full time but it may be that such an appointee may try to avoid confrontation with the Department. It is my view that civil servants are conservative and inward looking. Such an appointee would be the ear of the Minister and would carry the message back and forward.
I was rather surprised that the Minister was not available to meet the chairman or managing director of a semi-State company recently because there should be continuous liaison between such people. The Minister will be aware that the political heads of those companies are very influential. In the case of Irish Shipping, I understand that there was not communication between the chairman of the board, the managing director and the Minister. It is possible that the debacle that occurred there could have been avoided if there had been communication. I am surprised that the Minister does not call for more communication between the managing director, the chairman and himself.
The argument I put forward in favour of appointing civil servants to boards did not necessarily relate to the NDC. I did not say that it was my intention to recommend a civil servant for appointment. Sometimes civil servants are conservative but on other occasions they are not. Very often they can be extremely innovative.
Like everybody else.
Precisely.
Question put and agreed to.
SECTION 12.
Question proposed: "That section 12 stand part of the Bill."
Under this section the articles of association can be changed by the agreement of the Minister. Section 11 says that "The articles of association of the Corporation shall provide that..." and then lists a number of items. The Dáil in passing section 11 has agreed with those items being in the articles of association but in section 12 it is agreed that the Minister may change those articles. I take it that the Minister cannot change the items in subsections (a) to (f) inclusive in section 11?
I could not do so. The Oireachtas is supreme.
I am aware of that.
What the Oireachtas has decided is what I must do. I have discretion only in matters other than those mentioned.
Are there any criteria set out for testing the performance of the NDC with regard to the rate of return on investment or level of employment created? Has the Minister set out in a pre-determined way what he would agree as acceptable or unacceptable in standards of performance? Is there a possibility, under this or any other section, of some review system other than a vague ministerial intervention by way of policy formation?
On the Deputy's first point concerning standards, the standard will be the return on investment being in excess of the rate of interest being paid by the Government on money borrowed to give to the corporation. If they did not have such return we would not be living within the terms of the statute. There is another very strong performance related criterion in this legislation, which is in the section dealing with the administrative expenses of the corporation. It is stated there that the administrative expenses will be payable by the Minister only for the first five years and at the end of that period the corporation will have to find their own expenses from within their own resources, that is, from returns of profit, disposal of shares and of their own investment. That, more than any theoretically——
Is this in order on this section?
Yes, it is.
Yes, it is relevant to the section.
That is an even stronger requirement than putting in a target of return. You will not know in any given year whether you are on the way to achieving a stated target or not. You may have made an investment last year and it might be building up to making an enormous profit in three or four years' time, but not this year. You could say that was not meeting the criterion and could chop it. One would have to be a little more flexible in the way one phrases the requirement, but the two matters that I have mentioned are reasonably strong.
Question put and agreed to.
SECTION 13.
Amendment 20 is in the names of Deputy Mac Giolla and Deputy De Rossa.
We have already dealt with that amendment. It was accepted.
I move amendment No. 20:
In page 9, paragraph (b), line 4, to delete the word "shall" and substitute "may".
Deputies Brennan and Lyons felt as I did in putting down this amendment that it should not be compulsory on the NDC in all cases to realise an investment within a specified period or as soon as financially prudent. On re-reading the section, my amendment does not work in that way. This "shall" is not the kind of "shall" that I thought it was. I meant the mandatory "shall" which I was changing to "may". I meant that they must not be compelled in all circumstances to do so.
This section makes it compulsory on the NDC to realise their investments even if they are very profitable and very useful in getting some other project off the ground. Under this section they would be compelled to sell off that investment and move to something perhaps completely new. This is an unfair restriction and might be dangerous for them. For that reason I put down this amendment. I am not quite sure if this has the desired effect, but the intention is that it will not become compulsory on the NDC.
When we touched briefly on this section earlier, I indicated that the Bill was full of restrictions, with references to realisation of investments and liquidating assets and other such terms. This entire section is totally unnecessary. It does not add anything to the objectives of the NDC. Having listened to the debate for two hours, I find that this section reduces the sharpness of the Bill. The substitution of the word "may" for the word "shall" might give some element of judgment to the corporation.
Section 13 also mentions the general duty of the corporation. That is a very vague phrase. In section (b) one may be talking about the selling off of a successful venture and keeping the lame ducks. Is that hidden in this section? Would the Minister comment on that? Unless it is included for purely legal reasons, I am of the opinion that this section is unnecessary. The phrase "as soon as it is financially and commercially prudent" bothers me. This may have been one of the problems in the gestation period of this Bill and I wonder did the two parties in Government solve the problem by way of this section? I am not so sure. I shall leave it to the Minister.
On this amendment I wish to say that when recently the chief executive of the National Enterprise Agency came before the Public Expenditure Committee he was asked about criteria performance for investments undertaken by the NEA. He was quite explicit in saying that there was only one test of performance which was whether when you sell the investment you reap a reward. I would be opposed to Deputy Mac Giolla's amendment in trying to make it discretionary because I fear that, if there were not a degree of obligation on the corporation to sell, this crucial test of performance would be lost. Contrary to what Deputy Lyons says, this section is designed to prevent lame ducks being continually supported. If discretion is admitted in the matter of whether or not one gets rid of lame ducks, my fear would be that the lame ducks would be retained. However, this section guarantees that lame ducks will not be a continuing burden and drain.
It is the total opposite. It is the general duty of the NDC to realise their investments as soon as it is financially and commercially prudent. That is the mandatory legislative instruction to the NDC. They must get rid of enterprises that are doing well. I know what the Minister is trying to do but I think he has gone about it in the wrong way. He wants to divest the State of holding companies because he wants to keep State involvement to a minimum. Then all of the companies should be disposed of, although in the case of some it might not be commercially prudent to do so. The section makes it mandatory to dispose of a company when it is commercially and financially prudent in such a way as to make a reasonable return on the investment. One might also sell a company to cut one's losses. Money might be lost by selling the company and it might not be possible to get the return required under the section.
It appears that the section would prevent the NDC disposing of a company showing a loss, although it would be the sensible thing to do. Perhaps the section should omit the provision about return on an investment. There may be an opportunity to dispose of a lame duck company in the portfolio but under this section it could not be disposed of. I maintain that it should be possible to get rid of it as part of a loss-cutting exercise. There is no doubt what the section is about. If it is mandatory to get rid of the good ones, then it is logical that the NDC will keep the bad ones. That is the corollary. I should like to see a clause included that they would endeavour to get rid of all of them, including enterprises doing badly. There is no reason why those doing badly cannot be rationalsied and sold off in the same way as the good ones are sold off. Why keep the bad ones?
The position is that the corporation will carry out their objects in such a manner as to earn a reasonable return on any investment. If an investment is going deplorably badly a reasonable return on that investment at that time may well be to sell it for a quarter of what was put into it because by retaining it, it might ultimately make only one-sixth of the original investment. The corporation have the general objective to realise their investments as soon as financially and commercially prudent and they should do that in such a way as to earn a reasonable return. That does not pre-clude the corporation from getting rid of loss-making companies. I expect that they would endeavour to get rid of loss-making companies more quickly than the ones that are doing well because, in the latter case, there is the prospect that by hanging on they may make a little more. In the case of companies doing badly, the sooner they get rid of them the better.
Is the Minister saying that a loss could be a reasonable return?
It is now 6.45 p.m. In accordance with an order made this morning I must put the following question——
Before you put the question, we have reached only 13 of the 33 sections and quite a number of amendments have been put down. Could we introduce these elements on Report Stage?
You should have raised that this morning when this order was before the House.
He should have raised it with his Whip.
There has been the utmost co-operation on our side of the House.
I have no alternative but to put the question. An order was made this morning under which I must put the following question at 6.45 p.m. and I would ask Deputies to resume their seats.
Question put: "That the amendments set down by the Minister for Industry, Trade, Commerce and Tourism and not disposed of are hereby made to the Bill; the Bill as amended is hereby agreed to in Committee and, as amended, is reported to the House and the Fourth Stage is hereby completed and the Bill is hereby passed".
The Dáil divided: Tá, 71; Níl, 60.
Tá
- Allen, Bernard.
- Barnes, Monica.
- Barry, Myra.
- Begley, Michael.
- Bell, Michael.
- Bermingham, Joe.
- Birmingham, George Martin.
- Boland, John.
- Cooney, Patrick Mark.
- Cosgrave, Liam T.
- Cosgrave, Michael Joe.
- Coveney, Hugh.
- Creed, Donal.
- Crotty, Kieran.
- Crowley, Frank.
- D'Arcy, Michael.
- Deasy, Martin Austin.
- De Rossa, Proinsias.
- Desmond, Eileen.
- Donnellan, John.
- Dowling, Dick.
- Doyle, Avril.
- Doyle, Joe.
- Dukes, Alan.
- Durkan, Bernard J.
- Enright, Thomas W.
- Farrelly, John V.
- FitzGerald, Garret.
- Flaherty, Mary.
- Flanagan, Oliver J.
- Glenn, Alice.
- Harte, Patrick D.
- Hegarty, Paddy.
- Hussey, Gemma.
- Keating, Michael.
- Kelly, John.
- Bruton, John.
- Bruton, Richard.
- Burke, Liam.
- Carey, Donal.
- Cluskey, Frank.
- Conlon, John F.
- Connaughton, Paul.
- Coogan, Fintan.
- L'Estrange, Gerry.
- McGahon, Brendan.
- McGinley, Dinny.
- Mac Giolla, Tomás
- McLoughlin, Frank.
- Manning, Maurice.
- Mitchell, Gay.
- Mitchell, Jim.
- Molony, David.
- Moynihan, Michael.
- Naughten, Liam.
- Nealon, Ted.
- O'Brien, Willie.
- O'Leary, Michael.
- O'Sullivan, Toddy.
- O'Toole, Paddy.
- Owen, Nora.
- Pattison, Séamus.
- Prendergast, Frank.
- Ryan, John.
- Shatter, Alan.
- Sheehan, Patrick Joseph.
- Skelly, Liam.
- Spring, Dick.
- Taylor-Quinn, Madeline.
- Timmins, Godfrey.
- Yates, Ivan.
Níl
- Ahern, Michael.
- Andrews, David.
- Aylward, Liam.
- Barrett, Michael.
- Blaney, Neil Terence.
- Brady, Gerard.
- Brennan, Mattie.
- Brennan, Paudge.
- Brennan, Séamus.
- Browne, John.
- Burke, Raphael P.
- Byrne, Hugh.
- Byrne, Seán.
- Calleary, Seán.
- Collins, Gerard.
- Conaghan, Hugh.
- Connolly, Ger.
- Coughlan, Cathal Seán.
- Cowen, Brian.
- Daly, Brendan.
- Fahey, Francis.
- Fahey, Jackie.
- Faulkner, Pádraig.
- Fitzgerald, Liam Joseph.
- Foley, Denis.
- Gallagher, Denis.
- Gallagher, Pat Cope.
- Geoghegan-Quinn, Máire.
- Haughey, Charles J.
- Hilliard, Colm.
- Hyland, Liam.
- Kirk, Séamus.
- Kitt, Michael.
- Lenihan, Brian.
- Leonard, Jimmy.
- Leonard, Tom.
- Leyden, Terry.
- Lyons, Denis.
- McCarthy, Seán.
- McCreevy, Charlie.
- McEllistrim, Tom.
- Morley, P.J.
- Moynihan, Donal.
- Nolan, M.J.
- Noonan, Michael J. (Limerick West)
- O'Connell, John.
- O'Dea, William.
- O'Hanlon, Rory.
- O'Keeffe, Edmond.
- O'Kennedy, Michael.
- O'Leary, John.
- O'Rourke, Mary.
- Power, Paddy.
- Reynolds, Albert.
- Treacy, Noel.
- Wallace, Dan.
- Walsh, Joe.
- Walsh, Seán.
- Wilson, John P.
- Wyse, Pearse.
Tellers: Tá, Deputies G. Birmingham and McLoughlin; Níl, Deputies Barrett(Dublin North-West) and Browne.
Question declared carried.