Dáil Éireann debate -
Wednesday, 4 Nov 1987

Vol. 374 No. 10

Shipping Investment Grants Bill, 1987: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

Mr. J. Mitchell:

As I pointed out on the last occasion, I welcome the Bill because it brings into law policy decisions I announced as Minister for Transport. In one area there has been an improvement, relating to extending the age of secondhand ships which will qualify for the grants from five years, as originally proposed, to seven years. However, I am extremely disappointed that a figure of £1.5 million — it may be less than that now — is provided in next year's Estimates for this. Originally it was proposed to make £2.5 million available per year and that was accepted by the Government on the basis that it would more than remunerate itself. We are dealing with an area with major growth potential. We can create many jobs and at the same time meet the strategic fleet requirements of the country in the event of an emergency. All in all we can save the Exchequer money. This cut-back is clear evidence of the Government's mad, unplanned cuts across the board. This is one of the many ill-considered cuts being made by the Government who for four and a half years, when in Opposition, preached largesse and opposed cuts in public expenditure. They took office without a prepared plan and in Government are swinging the axe madly and are even cutting down nicely matured trees.

All Members are aware that there are 250,000 persons unemployed and that by the winter the figure will be in excess of 270,000. The Government have conceded that by 1989 the figure will be in excess of 300,000. It is hard to see how society will be able to cope with such high unemployment. We must do everything possible to encourage the creation of jobs in all areas but the Government have not done anything in that regard. When in Government we selected this area for development. I accept that the Government have taken on the policies we announced on 6 January lock, stock and barrel and intend implementing them but they have reduced the resources available. I should like to plead with the Minister to go back to the Minister for Finance to get the original sum agreed, £2.5 million. It will be a worthwhile investment.

The measures before us have enabled Irish Continental Line to be saved. The acquisition of ICL was greatly facilitated by the provisions announced in my package on 6 January, some of which were given effect in the Finance Act and the remainder of which are incorporated in the legislation before us. There was a third leg to the package, the move by the chairman of the Revenue Commissioners to make decisions in regard to certain tax arrangements. We were in a position, as a result of those decisions, to save ICL. That happy development will ensure the continuation of ICL and offers great expansion by the company in the future.

What about the B & I, a company which is involved in protracted negotiations at present? I do not wish to say anything that will impede those negotiations but it is worth pointing out that any steps taken should limit the call on the Exchequer and define clearly what the Exchequer exposure is to be this year and for future years. We should not be prepared to go beyond that but at the same time we must guarantee the future of the B & I. It is vitally important that the B & I continue in business. Whatever the result of the current negotiations steps should be taken to ensure that an Irish line continues on the cross-channel services to the UK. It is vital to our strategic requirements and to our national interests. It is also vital from the point of view of creating employment.

When I was Minister I was in charge of a host of major State bodies and I was frequently depressed by the disposition of management to look to job reductions as a solution to their financial problems. In doing that they were only following a fashion which has been endemic in the private sector for the past ten years. It is now the fashion to judge the success of managers by the extent of the reduction in their workforce. That is wrong and we should stop that policy in the State and private sectors. We should adopt policies which will encourage employment and change the decade-old fashion of shedding jobs. The answer to every financial problem here has been to shed jobs. That policy has gathered so much momentum that we are reaching the stage when there will be an explosion. That is not an exaggeration. Any Member who, like me, represents a working class constituency where unemployment is at its worst will be under no illusion. If the problem continues to grow there will be an explosion with untold consequences.

We should be doing everything possible to increase employment and we must start by stopping the policy of shedding jobs in the State and private sectors. I am aware that the Government cannot decide for the private sector but they can adopt policies that are conducive to creation of employment. That is what the Bill is about in the shipping sector. There is a considerable number of persons with marine expertise, particularly the employees of Irish Shipping who are unemployed. I hope that those harddone-by employees, whom we could not help because of legal and other constraints, will be the first to be re-employed as a result of this legislation.

B & I seem to be following the fashion of the last ten years in shedding jobs to pay a wage increase to which they should never have agreed. It is madness and should be stopped. In the B & I, the unions indicated — and they should be congratulated for it — a willingness to take a pay freeze for the next three years. That is precisely the example which should be followed throughout the public service. I do not want to pretend that public servants are overpaid because many of them are underpaid but, given the national situation, it would be infinitely better to have a prolonged pay standstill in the public service and to maintain jobs.

Further job losses are unavoidable in the B & I but there is a way to get the resources they need to keep most of the services and employment. I referred to this a couple of weeks ago when I was speaking on the Bill but I will recap briefly. We should form a subsidiary company of the B & I to which all the assets of the company will be ascribed as well as an even amount of the debt. The Exchequer would, therefore, take on board the remainder of the debt which would be vested in the holding company and remitted over a period of years. The B & I would then have a solid and sound balance sheet. Like ICL, the B & I should be told to go out and attract investors, to get money from the private sector. In the Irish Independent today, Dr. Tony O'Reilly is quoted as saying that there is plenty of money around for investment in Irish projects if they make sense. The B & I could make sense as a joint venture between the State and the private sector. Why do Sealink make profits on the Irish sea while B & I do not? There is no intrinsic reason for not making a profit on this route.

B & I are the last remaining subsidised shipping company in these islands. It is in their interests to go down the road of joint venture with private participation. That would be much better than losing 100 jobs and services. I urge the Minister to do everything he can to bring about a solution along the lines I proposed. When I was in Government this solution was my first choice but the thinking was too novel for the Department of Finance and was shot down. They went for the second choice, which was, to pour into the B&I an initial investment of £120 million and a commitment to £6 million for each of the succeeding three years. It has not worked, principally because the State sector ethos is still there, the belief that because they are a State company nothing can happen to them and that they will always be bailed out by the Exchequer. It has adversely affected the performance at all sorts of levels in the B&I and that psychology must be broken.

Great improvements have been brought about in the B & I. Mr. Alex Spain, the chairman and chief executive, the board of directors and the workforce deserve a great deal of credit for the changes they have embraced over the past couple of years but they have not been enough. The answer is not to cut, cut and cut. We must think in terms of growth which the Shipping Investment Bill is all about. The terms of the Bill, together with the provisions of the Finance Act, make the possibility of private investment in shipping, including companies like the B & I, all the more attractive as the ICL shares issue has proved. I hope that the discussions now coming to a conclusion within the B & I between management and unions and between the company and the Department will not just be on retrenchment but will also have growth in mind.

As Minister for Communications, one of my principal jobs was to provide for sectoral development and to try to get growth and development in the sector of the economy for which I was responsible. This has worked particularly well in the area of aviation in which there has been a fantastic and persistent improvement over the last few years. There has also been a vast improvement in the performance of CIE in each of the past four years after 15 years of reverses. We now have an opportunity to get the same improvement in the shipping industry. I hope that the Minister ensures that, rather than retrenchment, the growth for which this Bill was designed will extend to the B & I.

Mr. B. O'Keeffe:

Listening to Deputy Jim Mitchell one wonders at his short memory. He spoke about the number of unemployed people but did not mention the fact that our national debt doubled during the previous Governments' term of office from——

Mr. J. Mitchell:

The Deputy's party said we were not spending enough — such hypocrisy.

Mr. B. O'Keeffe:

When this Government came into power they were faced with a daunting task of dealing with the financial stringencies under which the country is forced to operate.

With regard to the Bill, the Irish shipowners have been floundering in heavy seas and many have drowned in the process. However, the Minister has now thrown them a lifebelt and it is up to the industry to grasp it, to pull themselves ashore and to get the industry going. One also has to acknowledge that there is a refreshing understanding of commercial reality in the Department of the Marine and that the expertise obtaining within it has manifested itself in producing an excellent package for the industry. The combined thrust of this package can only encourage existing shipowners to replace and to update their fleets and to entice investors to consider ship owning as a new development.

In relation to grants and training, shipping companies receiving grant aid should be required to fund or to participate in the training of deck officers and marine engineers which is undertaken at the national training centre in the regional college in Cork. It is a requirement of the Merchant Shipping Act that trainees get sea time. They generally spend 20 months out of a total of three years training at sea. While attending the college they receive grants from the European Social Fund but it does not apply when the students are at sea. At the moment the shipping companies accept the trainees on a work experience programme arranged with the college authorities. They pay gratuitously an emolument to the college authorities to cover each trainee on such a programme. This scheme enables them to avoid the onus of employing the trainees directly and it therefore rids them of responsibility for further employment when training ceases. This situation is satisfactory and indeed I congratulate the Chamber of Shipping for their co-operation with what is the appropriate training authority in Cork. However, this could change and students without the requisite work experience to attain their qualification would be at a loss. If possible, the Minister should tie in payments of grants with training and by doing so he could ensure a steady growth of trained personnel for work either at home or abroad.

The quality of both courses in the regional college in Cork has resulted in international companies actively seeking these graduates many of whom have been successfully placed in worthwhile employment. It is very easy to give financial assistance but that in itself does not guarantee skilled manpower to man the ships. The suggestion of integrating grants with training should be an integral part of the Bill particularly where there is no cost to the Exchequer. Also, when giving grants to Irish ship owners we should stipulate that the manpower is to be recruited from nationals. This would be akin to the IDA giving grants for projects coming into this country and ensuring that persons are taken from our live register rather than from abroad.

Minister of State at the Department of the Marine (Mr. P. Gallagher):

Ar dtús ba mhaith liom mo bhuíochas a ghabháil leis na Teachtaí go léir a labhair san díospóireacht seo, an chéad lá agus arís inniu. Chuir sé áthas orm an méid suime ata acu san mBille seo.

I wish to thank Deputies for their encouraging and supportive contributions to the debate on this important legislation. The Shipping Investment Grants Bill is a progressive measure designed to enable the exploitation of an area of huge potential within the economy which has remained relatively underdeveloped up to this. The Government, in creating the Department of the Marine, have made clear their commitment to the development of our marine resources. As the first legislation to be introduced under the aegis of the new Department this Bill represents a milestone in their brief history.

The object of the Bill is the revitalisation and expansion of the indigenous merchant shipping industry. Ninety-five per cent of our trade is carried by sea. This fact powerfully underlines the importance of shipping to the economy of an island state such as our own. That less than 20 per cent of this trade is carried in Irish registered vessels is a matter of concern. It compares unfavourably with our EC counterparts.

The Bill provides for grants of up to 25 per cent towards the cost of purchasing new or secondhand ships less than seven years old. Some Deputies expressed the view that ships of up to 12 years old should be eligible under the scheme or failing that, that the age limit be raised for the purpose of giving access to the Business Expansion Scheme to projects involving the purchase of ships of up to that age. As Deputy Cullen rightly pointed out, one of the main objectives of the grants scheme is to rejuvenate the Irish Shipping Fleet whose age profile is, on average, significantly higher than those of our EC partners.

Another important consideration regarding the age of vessels which may be grant-aided is the question of safety. Ships built after May 1980 when the Safety of Life at Sea Convention (SOLAS) came into force were constructed in accordance with the international safety standards adopted under that convention. Vessels up to seven years old comply with those standards and are consequently more desirable additions to our national fleet.

Returning to the question of access to the Business Expansion Scheme, this is provided for under the terms of the Finance Act, 1987. Any amendment to those terms of access would fail to be considered during the drafting of the 1988 Finance Bill. As it stands, there is no reference in the Bill before the House to fiscal incentives such as the Business Expansion Scheme. The views expressed by Deputies in this regard will, however, be borne in mind when the 1988 Finance Bill is drafted.

Subject to budgetary constraints, at least £1.03 million will be made available under the scheme during the first full year of its operation in 1988. In the two remaining months of this year it is anticipated that approximately £500,000 will be paid. As regards approval of projects under the Business Expansion Scheme, this must await the passing of the Bill, since access is linked to eligibility under the grants scheme. Pending the enactment of the legislation, however, two projects have been submitted for consideration and judging by inquiries it appears that shipowners will avail of the opportunities for investment which it offers.

Deputy Kavanagh asked whether the 25 per cent grant includes EC funding. It does not. Funding would not be made available for secondhand ships and in general the EC is wary of funding new mobile assets.

Deputies Doyle and Kavanagh suggested that the loss of a ship should be treated differently from transfer, sale or other disposal, should non-compliance with the conditions of the scheme require repayment of the grant. I assure Deputies that the parliamentary draftsman's advice is that the discretionary powers at my disposal under section 6 (2) of the Bill are sufficiently broad to encompass such a situation. Detailed administrative conditions attaching to the scheme will clarify this further and the Deputies' points will be taken into account in drawing up these conditions. It should, nonetheless, be remembered that the conditions of the scheme, including the repayment in certain circumstances of the grant, are designed to ensure that grant-aided vessels are employed in the applicant's business and will continue to be of practical benefit to the economy as part of the national fleet.

Deputies Cullen and Kavanagh raised the question of our port facilities. I feel that these facilities are adequate to cater for existing and short term future levels of our maritime trade. In the 1987 funding for commercial harbours there is included a non-recurring provision of £3 million for the Dublin Port and Docks Board, which effectively will leave as much money available for other ports during the coming year.

The fiscal incentives which have been introduced for the shipping industry will have a significant impact. The 10 per cent corporation tax rate will allow shipowners to channel profits into the development and expansion of their services. Interest in the business expansion scheme has indicated that this could also become an important source of finance for the industry. In addition, the way is now open for shipowners to approach the National Development Corporation for investment support in projects which are likely to yield a satisfactory return.

I can also assure Deputies that the investment grants scheme is only part of a long term strategy for the development of all aspects of the shipping industry. With less than a fifth of Irish seaborne trade being carried by Irish vessels there is scope for development in a number of sectors within the trade. At the moment, for example, we have no refrigerated vessels in our national fleet and depend on foreign operators to carry our perishable goods both in terms of imports and exports. This is typical of the opportunities which exist for Irish operators in the shipping sector.

I am glad that the question of employment has been raised again today by Deputy Mitchell because this is an important element in the entire package for the industry and is a central consideration in the thinking behind it. The benefits in terms of employment will be a basic consideration in deciding on which projects will receive grant aid. Inquirers have been made aware that they will have to come through on jobs for Irish personnel and the same will apply to formal applicants. Grantees will in any event, have to comply with the manning regulations for registry which require Irish certificates of competency.

Deputy Mac Giolla asked about the publication of the report of the Committee on Strategic Shipping Requirements so that its findings should be available to the House in deciding on the provisions of the Bill. I must point out, as indeed Deputies Doyle and Jim Mitchell have done already, that the recommendations of the committee were published in the Green Paper on Transport. Both this Bill and the fiscal incentives introduced in the 1987 Finance Act, were clearly related to those recommendations and in my view represent a genuine response to them. I hope nevertheless to make a copy of the report of the committee available to Deputies through the Dáil Library provided that all the committee members are agreeable to this course of action.

I share Deputy Jim Mitchell's concern for the former employees of Irish Shipping Limited. The most effective support which can be given at this stage is through fostering a climate of optimism within the shipping industry and by supporting its expansion through the grant scheme and the other fiscal incentives which have been introduced. The £7.5 million to be made available represents a potential £30 million investment in the industry which will meet the country's basic strategic shipping requirements and expand our merchant fleet. Only when these objectives have been achieved will job prospects improve and employment of qualified personnel increase.

Deputy Mitchell in his contribution today referred to the B & I problem. I appreciate that he touched on the periphery of the problem only, in so far as negotiations are in train at present and none of us wants to impede or to jeopardise these negotiations. The Deputy will appreciate that this is not a matter for the Department of the Marine; B&I problems are a matter for the Department of Communications. While negotiations are at a delicate stage all of us in this House should ensure that we do not pursue the matter.

Deputy Mitchell referred also to the necessity to make available £2.5 million rather than the £1.03 million which is available in any one year. We would like to think that £2.5 million could be made available but practically all of us in this House appreciate that there have to be cutbacks and we all have different views on where these cutbacks should be made. While the £1.03 million for the next financial year may not be adequate we will certainly take into consideration that only the most worthwhile projects will be selected. With the limited amount of moneys available shipowners will come forward more quickly knowing that the funds are limited. Other programmes have been cut and we also have to swallow this pill. If there are worthwhile projects that require further financial aid we will always consider them. In addition, the Deputy will appreciate that while the 25 per cent grant is important it does not preclude one from availing of the business expansion scheme provided the Department, having processed an application, decide that the application would be eligible for a grant.

We in the Department of the Marine brought this legislation to the House as quickly as possible. It was referred to by Deputy Mitchell who was Minister for Communications when it was announced on 6 January. We could not have brought it to the House much more quickly. In conclusion, I am confident that, on the basis of the interest already expressed by ship owners, the Shipping Investment Grants Bill will provide the much needed impetus for the expansion of our fleet and the revitalisation of our shipping industry.

Question put and agreed to.

Agreed to take Committee Stage today.