Shipping Investment Grants Bill, 1987: Second Stage.

Minister for the Marine (Mr. Daly)

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

The purpose of this Bill is to provide a statutory basis for a scheme of investment for ships. The Bill will enable grants of up to 25 per cent to be paid to Irish shipowners in respect of approved capital expenditure incurred in the purchase of new ships or secondhand ships which are not more than seven years old.

The Committee on Strategic Shipping Requirements established in 1985 to undertake a review of the country's strategic shipping needs in its report concluded that there was an overwhelming case on strategic grounds for the provision of incentives for the maintenance and development of the Irish fleet. The committee recommended, inter alia, that the appropriate Departments of State consider what measures could be taken to provide an effective stimulus to existing Irish shipowners and attract new investors to the industry.

A package of incentives, which included the grants scheme now being recommeded for the approval of the House, designed to maintain and develop the shipping industry for both economic and strategic reasons was announced. Other fiscal incentives which formed part of the package were introduced under the 1987 Finance Act. These reduce the level of corporation tax payable by shipping companies and allow such enterprises access to the business expansion scheme. While I do not propose to discuss these fiscal incentives which were dealt with in the Finance Act, they should be seen, in conjunction with the Bill now before us, as part of an overall policy of support and incentives for the Irish merchant shipping industry.

The Bill is designed to provide a stimulus to Irish shipowners to acquire additional tonnage in the face of a world wide recession and highly competitive conditions in the shipping industry. There is a need to examine how Irish owned ships can be helped to secure the highest possible proportion of the country's sea trade. Despite efforts in the past to increase the share of our trade carried in Irish ships, the proportion is still less than 20 per cent of total trade.

In the past ten years we have seen a reduction in both the EC and OECD share of the world fleet. The policy of OECD member countries (which include the EC member states) in the field of shipping is based on the principle of free circulation of shipping in conditions of fair competition. In general, the situation is that international shipping in the developed world is carried out on a fully commercial and, indeed, extremely competitive basis. However, there are some countries which through unilateral regulations or bilateral agreements have excluded either wholly or partially the shipping of third countries from their trades.

Irish Governments have promoted a policy of full commercial freedom of shipping on the basis that, as a maritime country, it best serves overall Irish economic interests. If positive steps are not taken now to support the Irish shipping industry there is a danger that ships on the Irish register will move away from the Irish flag to more accomodating administrations. This would have serious strategic and economic consequences for the Irish owned merchant shipping fleet. There is currently available very cheaply on the world market a considerable number of good quality secondhand ships in the five to seven year range. The provision of grants for secondhand ships will enable Irish shipowners to avail of the opportunity to acquire additional, good quality tonnage at reasonable prices.

There are a number of restrictions attaching to the grants scheme now proposed. Grants may only be payable to individuals who are both citizens of and resident in the State, or, to bodies corporate which are both incorporated in and resident in the State or to partnerships whose members are qualifying individuals or bodies corporate.

Grants may only be payable in respect of ships which are registered in the State and which are in excess of 1,000 tons deadweight and are self-propelled. Grants will not be provided in respect of fishing vessels, tugs, dredgers or offshore supply vessels because the scheme is aimed solely at the merchant shipping industry. In addition, the grant-aiding of the same vessel more than once is prohibited.

Additional conditions may be imposed with the concurrence of the Minister for Finance so as to ensure that grant-aided vessels are employed in the business of the applicant and will continue to be of practical benefit to the economy as part of the national fleet. The Bill also provides for the repayment, in part or in full, of the grant should the vessel cease, within a specified time, through loss, transfer or other disposal, to fulfil the purposes which rendered it eligible for aid. Further provisions empower authorised persons to enter and inspect ships or premises in connection with the administration of the scheme.

The Bill includes provisions in respect of offences and penalties for contravention of the Act. Such contraventions include the giving of false information, failure to comply with the conditions and fraudulent application for grants.

The scheme will have restrospective effect to 1 April 1987. Following the announcement of the decision in principle to introduce the scheme early this year certain Irish shipowners undertook investment in anticipation of early implementation of the scheme. In giving this legislation retrospective effect to 1 April 1987, eligible ships purchased since then may qualify for grants under the scheme.

The cost of the scheme, subject to an aggregate amount of £7.5 million will depend on the responses received from the shipowners. However, there is every indication that the industry will not be slow to avail of the opportunities which the scheme affords — a number of shipowners have already expressed interest in the scheme. It is anticipated that approximately £500,000 will be provided in grant aid during 1987. Subject to budgetary constraints it is expected that at least £1.03 million will be available in the first full year of the scheme's operation in 1988.

It is the Government's hope that the scheme will prove to be a much needed boost for the Irish shipping industry. Additional tonnage will also improve the employment prospects of Irish crews and will help to ensure that the State will continue to have at its disposal personnel with the vital seafaring skills and expertise which has, for so long, characterised our merchant fleet.

This country is heavily dependent on its rising level of exports and upon the import of vital raw materials for its industry. Our economic prosperity depends largely upon the shipping services available to us. It makes sense, therefore, that as much of our trade as possible should be carried in Irish owned ships. The grant scheme for which this Bill provides a statutory basis, together with the fiscal incentives mentioned earlier, will make a significant contribution to the achievement of this objective.

I recommend the Bill to the House.

Mrs. Doyle

The purpose of this Bill is to provide a grant scheme to maintain and develop the Irish merchant shipping fleet for obvious strategic and economic reasons, particularly necessary in the tragic demise of Irish Shipping. The one positive development of the tragic liquidation was that it stimulated a long awaited and much needed review of shipping policy.

My colleague, Deputy Jim Mitchell, as Minister for Communications, immediately set up a committee on strategic shipping requirements, to which the Minister referred, to investigate and report on the current and future strategic shipping needs of this country. The Bill before us, together with the inclusion in the Finance Act, 1987, of the reduction in corporation profit tax on shipping profits to 10 per cent and the consequent qualification for the business expansion scheme, is a direct result of the proposals of that committee whose conclusions and recommendations were included in Deputy Mitchell's Green Paper on Transport Policy.

In peace time it is sometimes difficult to realise the importance of a strategic fleet, particularly for essential supplies. However, on the economic front, when we remind ourselves that over 90 per cent of our merchandise trade is carried by sea and 80 per cent of this by foreign shipowners, the argument for a competitive shipping industry is very obvious. There have been major difficulties in the shipping industry worldwide in recent years. An excess of supply over demand resulted in low freight rates with the consequent litany of losses by shipowners, bankruptcies and ships being laid up; still today there is a global surplus of capacity even though the European Community's share of world tonnage continues to decline.

Other member states like ourselves are reviewing their policies with the long term view of a Community maritime policy. I particularly pay tribute to our own small private shipping sector which has shown great resilience in the face of the worldwide depression. However, recent lower profitability has threatened the industry's very survival and has prevented expansion. I am, therefore, delighted to welcome this Bill which, subject to certain conditions, will allow grant aid of up to 25 per cent for the purchase of new or secondhand ships by Irish shipowners which is retrospective to 1 April last. The good news is that there are at least five vessels awaiting the passage of this legislation to obtain the benefits and I sincerely hope that the list will grow rapidly.

I note, however, that while £1.5 million was provided in this year's Estimates for grants under this legislation, the recently published Estimates for next year show a reduction to just over £1 million. I am dismayed by this and I hope that the Minister will respond, as I noticed from his speech that the £1.5 million is now down to £500,000 for grants this year. Perhaps the Minister has done his homework and that £500,000 will suffice but I would like assurances from him that any ships which qualify for grants in 1987 under this legislation will get them up to the limit of the £1.5 million made available this year for the package.

There are two aspects of the Bill to which I should like to draw the Minister's attention. He mentioned the Finance Act, 1987, and his wish not to develop discussion on it. I appreciate that but I would like to draw his attention to the cross-reference from the Finance Act, 1987, to this Bill. They are connected by a particular reference. Section 8 (a) of the Finance Act, 1987 deals with the qualification of shipping for the business expansion scheme now that it is considered a designated industry qualifying for 20 per cent corporation tax.

One of the conditions for such qualification according to this section is that it shall include a certificate by the Minister for the Marine certifying that the purchase of the ship was, is or would be eligible to be grant-aided under a statutory scheme of assistance for the purchase of ships administered by the Department of the Marine. This Bill, effectively, is such a statutory scheme. In other words, to be eligible for inclusion in the business expansion scheme that was developed in the Finance Act, the ship had to be eligible for a grant under the Shipping Investment Grants Bill which is before us today.

To be eligible for a grant under the terms of this Bill a ship has to be less than seven years old at the date of purchase, according to section 3 (2) (d). While I do not see any problems arising with the seven year limit on secondhand vessels for the purpose of grant aiding under this Bill, I believe that a seven-year age limit for the purpose of the business expansion scheme is not in the interests of the industry. The main reason for this is that excellent secondhand boats, often up to 12 years old, are bought from, for example, the Dutch and the Germans. Their ships do not come on the market until they are at least eight years old, in order to comply with grant conditions in their respective countries. After the eight years are up excellent value is often available to our ship owners when purchasing these secondhand vessels. The Minister referred to the excellent value to be had in relation to secondhand vessels between five and seven years of age and their might be some limits in this area but in the main our markets for secondhand vessels are the Dutch and German markets and these countries are constrained from selling ships until they are at least eight years old; otherwise they will not qualify for their grants for new vessels.

I am not quibbling with the condition in the Bill before us. Perhaps we can resolve this matter under other legislation and perhaps the Minister will advise me on that matter. It is the cross-reference between the Finance Act, 1987, and this legislation that causes me some concern, as under the business expansion scheme it is far too limiting to keep the ceiling at seven years; it should be upwards of 12 years. Perhaps we will decide on that top limit on another day but certainly seven years is much too restricting considering that these boats do not come on the market in most instances until they are over eight years old. I would like to be advised by the Minister as to whether this matter would be best resolved under this Bill or next year's Finance Bill. I suspect the best time to do it would be under next year's Finance Bill. Perhaps the Minister could bring it to the attention of the Minister for Finance as the shipping industry which we are trying to help today is his responsibility.

The second point I would like to draw to the Minister's attention, and perhaps he will be good enough to accept an amendment on it from me on Committee Stage or Report Stage, is in relation to section 6(2) which refers to the inclusion of loss of a ship. The Minister referred to this in his speech. He stated: "The Bill also provides for the repayment, in part or in full, of the grant should the vessel cease, within a specified time, through loss, transfer or other disposal, to fulfil the purposes which rendered it eligible for aid." I ask the Minister not to treat the loss of a ship or a vessel in the same way as the transfer or the disposal of a vessel. In the case of a loss through natural causes, or whatever the definitions of loss are in the insurance business, roll-over time should be allowed. Once the ship owner gets the insurance money for the loss of the vessel he should be allowed to re-invest that money within, say, a maximum of one year without the claw-back or the repayment of the grant. We should treat the loss of a ship quite differently from the transfer or other disposal of one. I will be circulating an amendment on Committee Stage or Report Stage in that regard and I ask the Minister to give it consideration as it is a very reasonable request and one which the industry feels is essential to make this most important legislation as effective as we intend it to be.

I would like, in paying tribute to the Minister for bringing this Bill before us, also to pay tribute, and I am sure the Minister will join me in doing so, to his predecessor, Deputy Jim Mitchell, for the enormous amount of work he had done in relation to the shipping industry, particularly following up on the reports of the committee to which the Minister and I referred. I look forward to the Minister's response, particularly on the two aspects which I brought to his attention, and I have great pleasure in supporting the Bill before us.

Mr. Cullen

Any measure which would encourage investment in Irish shipping is to be welcomed. Deputy Doyle has referred to the demise of Irish Shipping Limited which is sadly still lingering on. The workforce are still left in a limbo. I urge the Minister, in the context of the development of Irish shipping, to consider this matter. It is not helping the situation in the country at the moment. These workers deserve more attention from the Government than they have got to date and I ask the Minister to give them that attention.

As the Minister identified in his speech, the Committee on Strategic Shipping Requirements, set up in 1985, considered the whole area of Irish shipping and quite rightly identified that it was necessary to provide incentives to develop Irish shipping in a cohesive manner and this Bill is the first step in that direction. The Minister said in his speech that other measures on paper have been taken to support these projects. He mentioned the business expansion scheme which was referred to in the Finance Act earlier this year. Have any projects been approved under the business expansion scheme to date and, if so, what are they? How many proposals has the Minister approved and does he believe that the business expansion scheme will be of great benefit in this area, as I think it should be? I would like to know if the scheme is working.

The Minister said that there is a package of incentives and he referred to some of them. I get the impression from his speech that there are others which he has not mentioned and I would like to ask him what they are. The Minister said that only 20 per cent of the overall shipping trade in this country is handled by Irish Shipping. This is extremely sad. One of the main reasons for this is that there has been a total lack of proper planning in this area.

This leads me to the area of planning for harbours. We seem to operate under a system where each area is looked at in its own right without any proper co-ordination.

A major industry cannot grow in any country when there is lack of consultation and co-ordination, and this is no more evident than in the whole area of harbours and their utilisation at present. As the Minister is aware, the port of Waterford has been closed for the last seven years. This situation should no longer be allowed to continue. It is my sad belief that there is vested interest in ensuring that this port remains closed. It is wrong for people to blame just a few workers over a dispute which took place some years ago. This problem has been allowed to fester because of the lack of a proper harbour authority in this country. It is my contention that no one individual or group of individuals should be allowed to stagnate what is a national asset which belongs to the people. This brings me back to the overall planning of Irish shipping which is not being undertaken in the right way. I urge the Minister to consider this matter and to see what other Departments are directly affecting his ability to ensure that an efficient shipping fleet operates from this country.

The Minister quite rightly identified this country as a maritime country. It is a positive step that provision is made in this Bill for the grant-aiding of the purchase of secondhand ships. I am not quite sure about what Deputy Doyle said in connection with the eight-year period in other countries. It is my understanding that on the world market at present there is a surplus of shipping available. Perhaps the Minister is trying to ensure that an Irish fleet is kept healthy and young and that is important. If we are to undertake a serious programme of developing our fleet I do not want to see us purchasing ships that would be regarded as clapped out by the rest of the world and I presume that this mechanism is to ensure that that does not happen. I would like the Minister in his reply to tell me that there is evidence that a sufficient number of ships are available on the market at the moment to meet the requirements of Irish shipping at this time.

Debate adjourned.

Dáil Éireann debate - Thursday, 15 Oct 1987