We were dealing with a number of amendments that were taken together. The Minister of State was in possession.
Nitrigin Éireann Teoranta, Bill, 1987: Committee Stage (Resumed).
Debate resumed on amendment No. 3:
In page 2, in the Table, line 19, after "£180,000,000", to insert "or the amount actually owed by the Company on 2 November, 1987 whichever is the lesser".
—Deputy J. Bruton.
I had been making it clear that in pulling this deal together to get NET off to a fresh start we were not starting from scratch as we might have liked. NET were in some financial difficulties and the suggestion of a joint venture between ICI and NET offered the opportunity of a completely new start. We grabbed that opportunity.
Members opposite raised a number of points about the level of the guarantee, the involvement of the banks and other such matters. I believe we have dealt substantially with them. I have not had an opportunity to cover completely the position regarding gas. Natural gas is one of the largest and most fundamental costs in fertiliser manufacture. I have been pressed by Deputies to disclose the cost of the gas and the arrangements. Disclosure of the arrangements which IFI, the fertiliser company, have with regard to gas supplies would be extremely detrimental to IFI in the fiercely competitive market in which they are now operating as, quite bluntly, it would reveal vital commercial information about IFI's cost structure to their competitors.
Again, I want to reassure the House that there is no element of subsidy being passed on to IFI and I want to make that as clear as I possibly can. The price which BGE charge NET for gas must remain confidential as it is a contractual arrangement.
The key question which I want to follow up is why we need to have a State guarantee that in the event of this holding company failing to pay back their loans the taxpayer must find the money. We have been told by the Minister of State that he was offered the money by the banks as a loan without a State guarantee. He said that he found the terms unacceptable for two reasons; one of which was that a higher rate of interest would have been charged. I do not find that an unacceptable reason. Obviously, a loan without a guarantee is going to carry a higher rate of interest than a loan which does have a guarantee. The difference is not particularly high, £120,000 per annum on a loan of £30 million. It is well worth paying that price not to have to give a State guarantee.
However, there may be some substance in the Minister of State's second objection which was that the banks who were offering the money to the company said that if they did not receive the State guarantee that, in addition to charging a higher rate of interest, they would want a mortgage on the gas contract. What does this mean? Is it tantamount to a State guarantee or not? What is the gas contract worth? If the gas contract is worth a lot less than the State guarantee, I do not understand why the Government did not take the loan without the guarantee. If, on the other hand, the mortgage on the gas contract is as good as a State guarantee I can well understand why the Minister of State might decide to go for the cheaper one.
The Minister of State said he did not want to give any information about the mortgage and the gas contract. Let me say as unprovocatively as I can that this is central information which the House must have and it is not commercially sensitive. It is a unique transaction in that there is only one natural gas contract in the hands of NET. This is not information which would be of any use to a competitor because the holding company are not in competition with anybody else. We are not talking about a guarantee to Irish Fertiliser Industries. Whether NET Holdings have a State guarantee or not is irrelevant to the workers in Arklow or to the workers in Marino Point as they are not affected by the debts of the holding company. Their jobs will stand or fall on the commercial viability of Irish Fertiliser Industries which are unaffected by the finances of NET Holdings. This amendment relates only to NET Holdings. There is a corporate veil drawn between NET Holdings and Irish Fertiliser Industries and what happens to NET Holdings will not affect Irish Fertiliser Industries.
A Chinese Wall.
Yes, but this is harder to penetrate. It is impossible for us on this side of the House to judge whether the Minister of State should have given this guarantee without knowing what the alternative was in some greater detail. The Minister of State should tell us what demands the banks made and what they amounted to. What did the mortgage on the gas contract amount to in commercial terms?
I accept that the Minister of State received the advice of corporate advisers on the deal and they may well have advised him to go for a 100 per cent State guarantee on the loan but I am not so sure that they were too pushed about whether the State gives the guarantee or not. Their focus is on the narrow short-term financing of NET Holdings and the IFI. They are not particularly concerned with or qualified to advise on the finances of the State. In this House we are supposed to be concerned with that aspect. Therefore, I am not over-convinced by the argument of the Minister of State if that is, in fact, his argument. The only corporate advisers who matter in this case are those in the Department of Finance and those of the Minister of State's own Department as they are concerned with the finances of the State and not with the finances of commercial entities.
I would like to pursue further with the Minister of State the meaning of this mortgage on the gas contract and what it amounted to in commercial terms. What was the balance of advantage in rejecting it and going for a full 100 per cent State guarantee on the loan?
I would like to support Deputy Bruton's request. The Minister of State in replying to questions about this fundamental issue said that the arrangements for the supply of gas from BGE to NET are confidential and that the arrangements for the trade-on from NET to ICI are a matter of commercial activity. It would seem that the Minister of State does not want us to know about the details of the arrangements which the banks asked for in regard to the mortgage. It is like being asked to approve of something when you are blindfolded and have your hands tied behind your back in a dark room.
I want to make it very clear that I will not be supporting this Bill unless I am given reasonable information on which to make a judgment. I am not in the business of selling a pup on behalf of the taxpayer. I am not impressed by the reference to corporate advisers. This company have been cluttered with advisers since 1961 and between them they have made some cock-up of the company. As an elected representative I am entitled to have this information just as much as any anonymous corporate adviser. I demand to be given this information and I will be opposing this Bill unless I receive it. We are asked to be comforted by the fact that NET will monitor the performance of IFI. I do not wish to be disparaging about the performance of NET but I do not believe anyone could be consoled by that on the basis of past performance.
It is not a question of going over past cases of moneys which have been spent and utilised in some way or other. We would like to know whether there is a bottom to this well? Will this be the last time the State will be asked to pick up the tab or can we expect to see the Minister of State in here again in six months time saying that IFI or NET, with the approval of the Minister for Finance, have spent another £10 million to £15 million and asking for retrospective permission to increase the guarantee? Will the Minister of State give us an unequivocal guarantee that that will not happen? I see from a glance at the record of the discussion the last time this Bill was debated that the then Deputy asked whether in making these moneys available we had any insurance or what action was being taken to stop the further erosion and the haemorrhage from NET, and so on. It is all déja vu, and it goes on all the time. If the Minister, as he is today, is asking us to support this Bill and we insist on getting information on which to make rational judgments, we have at least the same right as corporate advisers whose interests, good and all as they may be, are not necessarily similar to those of us in this House who have a broad interest in public welfare, public expenditure and the taxpayers. What price do BGE charge NET for their gas and at what price do NET sell it? I have an absolute right on behalf of the people to know what those arrangements are because we are not dealing with someone's private money here, we are dealing with hardearned cash which the taxpayer has to part with and about which he is given no choice.
Just before lunch the Minister talked about this money being essential, and I have no doubt that he is convinced that it is. In agreeing, as I assume the Minister for Finance did, to the over-expenditure, that is over and above the £150 million guarantees that were the basis of the last Bill and the current indebtedness which we are told is £168 million, depending on which script one reads — according to the Minister on Second Stage it could be argued to be £180 million already if you throw in the £20 million——
It is just on different dates. It shows how fast it is moving.
Does the Minister mean to tell me that in a week these boys lost——
Look at the dates.
I read in the Minister's speech: "These debts now stand at approximately £160 million following the transfer down to IFI of about £20 million of NET's debts in respect of working capital."
It has now gone up to £168 million.
That is the point. It has gone up £8 million since then presumably. Second Stage was debated last week. Is the Minister saying that that is an increase of £8 million?
It was £160 million at the transfer date.
The £168 million is liabilities.
What does the Minister mean by "liability"? Is it debt?
It includes interest and gas rates rolled up. It is a liability figure rather than a guarantee figure.
If it was only a guarantee figure of £150 million on the date it was signed it could not be £160 million.
Everything over £150 million is not guaranteed.
Did someone have to get permission to exceed that amount?
Yes, the Department of Finance gave such permission.
That is my point. Assuming for a moment that we agree today to a guarantee of £180 million, the Department of Finance next week might very well decide that it is necessary to give permission to spend more than that. Where is the bottom of the well? In terms of getting Government agreement — I would like the Minister's attention to this — I am not trying to be smart——
The Deputy should be happy, having put a question, that the Minister would have an opportunity to answer it. The Chair is not enamoured of these tripartite talks.
You would be surprised, Sir, at how well they worked before lunch. Tripartite talks can sometimes work. However, I take your caution and I will sit down and be of good behaviour.
We have to be careful that we do not suspend Standing Orders just because there is happiness at any given time. The other can happen.
God forbid that we should ever suspend Standing Orders. Let us get our priorities straight.
I am quite sure that the Minister has heard all these questions and that he will reply shortly.
In terms of the agreement which the Government and the Minister for Finance have given to the expenditure which has been incurred over and above the guarantees to date and in terms of the arrangements that are now in place vis-à-vis the £30 million in broad terms of extra guarantees that are being sought, what sort of examination was made of the expected performance of the new arrangement? For example, was there any evaluation of how well the company would do in the next two or three years? Was a business plan of any kind looked at? Is there some performance ratio? On what does one make these judgments? To what extent did NET say that if they got this money they could perform and therefore in two or three or ten years' time they would be relatively self-sufficient? I want to know that because if I were to go into the IDA today on behalf of a constituent or of myself I would not get inside the front door unless I had a very persuasive argument. That persuasive argument is at least as important when somebody comes in here looking for money. I have not heard that reference to what I might call the convincing elements of the arguments for NET getting more money on top of what they are getting already.
I am not trying to be awkward about this, but it is essential that the Minister tells us that these are the internal arrangements vis-à-vis the price of gas, so that we can make judgments on the commercial viability and, therefore, the political wisdom of agreeing to this Bill. Nobody wants to cause problems unnecessarily for the hard-pressed workforce or for management who undoubtedly want to do their best, but we cannot be expected to buy a pig in a poke either.
The point that Deputy Keating raised is worrying most Deputies. With a £150 million limit the company were unable to continue without borrowing further funds. The Minister said they were borrowing something of the nature of £1.5 million a month in order to keep going and it has gone up to a £168 million debt from £150 million guaranteed borrowing from the State. When it reaches the £180 million which the Minister estimates it will be in about 12 months, what precisely is this guarantee cut-off that the Minister has that they will not continue to require borrowing? Suddenly when they reach the £180 million they will need to borrow no more for some reason, the Minister seems to be guaranteeing us. Why? What will happen? What miraculous event will occur which will prevent NET from requiring to borrow any more funds once they reach the £180 million limit?
They will not be in the fertiliser business, they will be in the debt management business.
That is the point. It should be very easy for the Minister to tell us first what NET have been paying in the past for their gas. Presumably it was a percentage of the current price of heavy fuel oil and the new arrangement is that it be related again to the price of heavy fuel oil, whether 100 per cent or not. The Minister will be able to see what the difference in income will be to the company by this increase in the price of gas which they will be able to charge IFI. He will also be able to see what the servicing of the debt is costing. Apparently in a good year NET would pay off large amounts. They made a £42 million trading profit in 1984 and must have paid off a huge amount of the debt because they finished up with £2.5 million profit. The Minister should be able to say how much annual repayment and how much servicing of debt is required. Would the total be in the order of £20 million a year or what would be required to be paid off to manage this debt? The Minister should be able to say how the company will be operating on an annual basis with regard to both its income and the repayments it has to make. None of the Deputies has raised any doubts about the viability of IFI. There is no doubt about it because the debt burden has been taken off them and they will be in an excellent trading position.
Here we are presented with a problem that the holding company is in the greatest danger. If the holding company reaches a stage of collapse, what happens to the trading company, IFI? If the borrowing limit of the holding company is fixed at £180 million, is it the case that the Government will not bail them out again and will let them go to the wall? In that case, what would happen to the joint venture company, IFI? Is the Minister satisfied that the holding company has the potential to continue servicing the debt and holding its own and that £180 million will be the maximum amount required since it will be getting income from the dividends and from the sale of gas?
These are the questions we have in mind. When the Minister says that £180 million will be the limit, he must know something that will after events in 12 months' time when they have reached the borrowing limit. We would like some share in that information.
I have responded to the extent I can on each of these matters already, but I will touch on them briefly now. I have made the Government's position clear on the key matters and I have no scope to budge on that.
I find some contradiction in the points made by Deputy Bruton. He asks about the nature of the mortgage on the gas contract and then says that a mortgage could be tantamount to a guarantee. Any mortgage I know of on a fixed or contractual asset is tantamount to a guarantee. A person who takes out a mortgage is guaranteeing to hand up an asset in return for the debt. Perhaps I am innocent but I have not come across a mortgage that did not have a guarantee attached to it.
That is accepted. The point relates to the relative value of the security.
I am not being provocative but it is important to clear the air. On the one hand, there seems to be an objection to State guarantees.
Not always.
On the other hand, some Members opposite seem to be suggesting that a mortgage might not be out of the question. The mortgage in question here would certainly be tantamount to a guarantee. Either we want to give a guarantee or we do not. We cannot be against a guarantee in the traditional sense and then suddenly be in favour of it by giving a mortgage. There is a certain contradiction there.
I have given the reasons the bank's position was unacceptable. Certain papers were available to the Government and the decision taken was that because of the extra interest charges and the mortgage that was being talked about, a better option would be a State guarantee for an additional £30 million. I would stress that the State was already locked in for £150 million. I do not think the State envisages walking away from that. The best way out of the situation was to put an upper limit on the amount and to stick at it.
The previous Government were pushed many times to divulge the price of gas but they decided not to do so.
We were promised a better way.
Various Ministers in the previous Government quite rightly explained that the gas price is such an important element in the structure of this and other companies that it is not divulged. My memory is quite clear that this was the policy of the previous Government and it is being continued by this Government. These negotiations have been going on for over two years and the Government, having taken all the advice available, decided that this was the best way to tackle it.
Deputy Mac Giolla was concerned about what would happen to IFI if NET went to the wall. If NET got into difficulties and had to take certain steps, IFI would remain as a separate company which would be 51 per cent State-owned, IFI holding the other 49 per cent. The £180 million would certainly be a liability of the State. That is why this deal is so good in the medium and long term for both the workers in NET and the people as a whole. If we were starting from the bottom up to design a whole structure, we might not have done it this way but the reality is that ICI came on the scene, offering us international marketing capabilities and a partnership in a joint venture in an area which they know a lot about. They were prepared to go ahead only if some of the built-up losses were kept separate. The previous Government also felt that the joint venture was the best way out of the overall bind in which NET found itself. What Deputy Bruton and I are discussing is the various angles.
Deputy Mac Giolla and Deputy Keating were interested in projections and forward plans. We can make all the forward plans we like. Many plans have come before this House in recent years but most of the targets have not come within a mile of being achieved. We are all finding out the hard way and particularly in these circumstances. The future of NET Holdings where the State debt will be locked in depends on the performance of IFI and that depends on the ability of the management of both ICI and the new NET to make IFI a strong company internationally. If IFI succeed, as I know it will, with this joint venture it will be able to pay dividends to NET Holdings. Those dividends will be used to pay off the debt to the State. That is the plan but what could upset that plan, something over which I have little control, are interest rates and the price of oil. There is interest payable by NET Holdings on the bulk of the debt and the gas price we are discussing is a crude oil related price. Interest charges and oil prices could have a major effect on the future of that type of a debt company that NET Holdings now is. As Deputy Bruton pointed out that company now manages the debt, oversees IFI and receives the gas.
The future of NET Holdings depends on the commercial success of IFI in selling fertilisers internationally. Secondly, it depends on interest rates and oil prices. I hope those three factors will work and that IFI will be a major international success. I hope that in turn that success will help NET Holdings pay off their debt over a period. It would be a foolish Minister who would try to predict how interest rates, oil charges and the success of IFI will go. However, it is worth pointing out that ICI own 49 per cent of IFI. I can say confidently that ICI with their international muscle will make a success of IFI with the new NET involvement in it. I do not know of any failures that ICI have presided over. They have a good record in running successful companies and have convinced NET, and the Government, that as one of the major companies in the world they can run, in conjunction with NET, a successful fertiliser company.
Has the Minister of State seen some kind of blueprint or plan for that company?
No. We must remember that the negotiations went on for two years and that this represents a solution to a difficult problem. Plans or no plans a company with the type of strength ICI have behind them feel, and have convinced the Government's negotiators, that there is a future in the fertiliser business. They have got their markets and we have the production capability. It seems to me to be a sensible joint venture and it looks like it can work. However, it would be a foolish person who would try to predict fertiliser prices into the years ahead. I would not attempt to do it. I could bluff it but that would not make any sense at all.
I am glad the Minister has made it clear, in response to Deputy Mac Giolla, that the guarantee to the NET holding company has nothing to do with the future of Irish Fertiliser Industries. Whether we give this State guarantee or not is not going to affect one way or another jobs in Arklow or at Marino Point. We can talk about the fertiliser industry, joint ventures, synergy and so on and while it will all be very interesting it is not what we have to decide. Given that the NET holding company, a debt-management gas contract management company with nothing directly to do with the fertiliser industry, needs £30 million, what we must decide is whether it should borrow that amount on the back of a guarantee in the form of a mortgage on the gas contract — I accept that it is a guarantee — or on a 100 per cent State guarantee of the entire sum of money. It seems to me that the bank can only collect as much as it is owed and even if a mortgage on the gas contract is theoretically worth £60 million and they are owed £30 million they can only collect £30 million with the rest going back to NET. No matter what way we look at it the likelihood is that a mortgage on the gas contract is worth either less than but certainly no more than a 100 per cent State guarantee.
What I cannot understand — I am trying to understand it and I am not trying to be difficult — is why the Government when they were offered the money without a 100 per cent State guarantee but instead a guarantee in the form of a mortgage on the gas contract which could not be more and could only be worth less than a 100 per cent guarantee did not go for that given that the only difference between one offer and the other was £120,000 per year in interest which is peanuts on a loan of £30 million. I should like to know the net present value of the gas contract vis-à-vis the 100 per cent security? If the NPV is less than the £30 million State guarantee we are giving, that was what the Minister should have gone for because it was a lesser exposure of the State. I accept that the gas contract is the State's property. If, on the other hand, the NPV of the gas contract is more than £30 million, there is really not any difference in giving a State guarantee or going for a mortgage on the gas contract. It would not have been any worse to have given the mortgage on the gas contract because the banks could only collect £30 million anyway. As long as they were not allowed to lend any more money they were not going to be able to get back any more than the £30 million.
In putting the question I am aware that some Deputies will say that Deputies Keating, Mac Giolla and I in asking questions about this guarantee are somehow or other "endangering" the jobs in Arklow and Marino Point. I am grateful to the Minister for having made it abundantly clear that that is not the case, that the fate of the NET holding company does not affect Irish Fertiliser Industries and the jobs in those industries. The simple question we have to decide is, what is the best way of getting the money from the banks? Should we get it on the basis of a 100 per cent State guarantee at a slightly lower rate of interest or give what is either the same or probably a lesser security in the form of a mortgage on the gas contract and pay a slightly higher rate of interest? It is a matter of commercial judgement between these two.
Given what I know and having listened to the debate, I have to say that my judgement would be that the Government should have gone for the unguaranteed loan on commercial grounds and from the point of view of setting a precedent of not giving the normal 100 per cent guarantee. However, the Minister may have evidence which can show why the Government took their decision. I have no doubt that the Government are not in the business of deliberately making stupid decisions. I am sure there is a good reason for their going for a 100 per cent guarantee rather than for a superficially more attractive mortgage on the gas contract with a slightly higher interest rate. So far in this long debate the Minister has not given the commercial information in terms of net present value or whatever other commercial measure he wants to use to show to the House that it is the better deal.
Deputy Keating has been relentlessly — and I less relentlessly — pursuing the question of the price of the gas. If I was asked to give such information when I was Minister I would have refused to do so. However, I could make a case that the Minister should give the information now because the situation is slightly different as we have decoupled the two companies. I do not see any point in making a meal of it and I will not pursue it much further. I am determined to pursue the net present value of the mortgage of the gas contract vis-à-vis the 100 per cent guarantee.
Deputies will appreciate that the Chair is anxious to ensure that the debate is conducted in accordance with Committee Stage procedure. We are inclined to enjoy a liberal approach to this which is not leading to any great results. Could I ask Deputies to be briefer from now on?
I learned a lot from the discussion in regard to the relationship of the companies, etc. I do not want to know the price of the gas but it is a very important issue. Will the Minister say if there is any danger that NET will be selling gas to IFI at less than the price they are paying for it? In other words, is there a guarantee that they will always at least cover themselves or indeed make a profit from the sale of gas? It is possible that, with the drop in oil prices, the deal with Marathon——
The Marathon price in relation to NET will also go down.
I am not happy in regard to the amount of dividends. The Minister thinks there will be a huge dividend coming to NET from IFI but I do not think that will be the case. ICI, like any other multinational, will have plenty of other places into which to push profits rather than into IFI. Profits will show in other areas, whether in Richardsons or other places in Europe. I do not expect the dividend will be a major factor as they will be depending on the prices they will get for gas.
In view of the cost of the debt, will NET be able to hold their own? I hope that in bad years they will be able to do so and in good years they will make repayments. Is it possible they could go down so much that they could not cover the debt?
In regard to the question of the sale of gas by NET to IFI and its price, all the projections are that they will sell it at a profit.
The Marathon price will also fall.
All the projections are that the sale of gas from NET to IFI will be at a profit. That is as far as I can go at present in that regard. Obviously there are variables outside the control of a lot of people. Deputy Mac Giolla should not forget that 75 per cent of the profits of IFI accrue to the State which is a pretty good deal from the point of view of the State considering the ownership ratio. Deputy Bruton put it rather well when he said that the intention is to leave IFI as loose as possible to let them get on with being commercial and to work with ICI to create a sound, bigger company for ICI and the State. It is important to remember that this is a very exciting deal.
I do not want the impression to go out that just because NET Holdings do not affect the situation in IFI directly in some way we do not have to handle the old problem in NET. This is a sovereign State and we cannot walk away from the old situation in which a block of debt built up. However, we have isolated that debt and kept it in a separate legal entity. We provided the means to service the debt by the dividends from the success of IFI and the gas price paid to NET. NET have two sources from which to fund the debt. Deputy Bruton asked if they will fund the debt and I answered that it depended on the success of IFI commercially, on oil prices and on interest rates. There is no point in pushing me on that one because that is all I can say. In regard to this block of debt, we are talking about whether it was better to keep running with £150 million which the State guaranteed and to organise £30 million with the banks or to put the whole £180 million into the State at a lower rate of interest with no mortgage on our gas. The papers and documentation available to the State indicated that no one envisaged running away from our responsibilities in that context. It made a lot more sense not to pay the extra interest, not to mortgage the gas contract and to run in that direction instead of the other which was unacceptable to Government negotiators. Negotiations went on over a long period and the choice was clear, £150 million plus £30 million from the banks or £180 guaranteed from the State. We opted for the latter which was a decision taken by the Government after very careful consideration. Deputy Bruton said I was not giving him commercial information on which to base a commercial view but I will not give such information because it is not the policy of the Government to do so.
It is not commercial information.
The Deputy described it in that way.
What is the mortgage on the gas contract worth relating to the 100 per cent guarantee?
The bank's mortgage over the gas contract is also commercial information.
That cannot be commercial information.
It would certainly be of value to the competitors of IFI to know the value of their gas contract.
It is not their gas contract: the gas contract at the moment belongs to NET, not IFI.
It would be of tremendous interest to IFI's competitors to know the details of the mortgage——
I made it quite clear I did not want to know the details. I wanted to know the net present value of a mortgage on the gas company. A mortgage essentially means that one is entitled to get the entire value of one's loan repaid from that source of income. Obviously, as money will only accrue over a period, one judges it in terms of present value. I find it hard to believe the mortgage. In any event the company will not have to repay more than they owe. The choice is between a 100 per cent guarantee of that by the taxpayer or giving the bank an interest in getting their money back in the form of a mortgage on the gas contract. They cannot pay back more than they owe and if the mortgage on the gas contract is worth anything less than £30 million, it is a bad deal to go for the 100 per cent guarantee, that is unless the calculation is so fine that the £120,000 extra interest makes all the difference between the two alternatives. We are entitled to the answer to that question.
If the Minister has already indicated fairly forcibly in the course of the debate that what he has been asked to disclose is not in accordance with the figures disclosed when legislation such as this was introduced in the past, it is a fairly futile exercise to expect a junior Minister to depart from that procedure.
On a point of order, that may well apply in the case of the price of gas, and I am not pursuing that. It is the net present value of the mortgage on the gas contract which I am pursuing. That is a separate issue which has never come up before.
I can see infinity there. Has Deputy Keating a question on this matter?
I support the question. It would be as well to clear up the value of the mortgage. We are not talking about divulging the valuation of the actual gas field, or commercial details. The basis of this question arises from the offer by the banks to extend money on a no guarantee basis. They wanted a mortgage on the gas. We want to know what the balance was and that is not unreasonable. If we have a mortgage on our properties we know the size of it although it may not relate directly to the value of the property. That is a question that Deputy Bruton is pressing. Only with this information can we make a judgment. I have one or two other questions which I would like to ask but perhaps we could get that cleared up first.
The House is being asked to make a commercial judgment.
The Deputies know that what is discussed on Committee Stage is what is in the Bill. If we were on Second Stage we could discuss what should be in the Bill and what is not in it but on Committee Stage we have to discuss what is there. Speculation about what might be, and bringing in matters that do not refer to what is there is not helpful. Deputy Keating is entitled to ask as many questions as he likes on this section and note also that Deputy McCoy has a question or two to ask.
Am I right in assuming that Marathon are the supplier company, that they supply the gas to Bord Gais Éireann, that Bord Gais Éireann supplies it to NET, the holding company henceforth, and NET send it on to IFI? I am sure there are reasons for this but I would not bother with the middle men at all, I would go back to see if I could get the best price directly. I do not know if they can do that.
There are contracts in place.
There are a number of other serious questions about the basis of that contract which Deputy McCoy will be asking in a moment. In the face of international competition, whether or not there is a glut on the market place of the output from this extraordinarily convoluted process, is it not tying people's hands and feet to essentially get involved in a contractual arrangement which by definition cannot be competitive relative to others who are entitled to play the market, just for the purposes of shoring up an arrangement we inherited? I am not saying that we should renege on guarantees but the Minister has introduced a Bill for which he asks our support and the key information we need to make a judgment on it is not available. The price of the subsidy is relevant and if we do not get that how can we make judgments about these things? Deputy Bruton's point about the mortgage value and the reason we are going down the route to a 100 per cent State guarantee as opposed to unguaranteed moneys from the bank is essential. The Minister has not clarified that.
Deputy Keating is an experienced Deputy and he knows that while the information might be important it is not related to what is here. Now Deputy Keating is going beyond the manner in which he has treated us to date, by doing a John the Baptist act on his colleague Deputy McCoy, telling us what questions he will ask. That is an indication of the excessive liberalism we are having.
(Interruptions.)
The Chair finds itself being drawn into this debate.
I wish a better future to Deputy John McCoy than John the Baptist had at the end of it all.
(Interruptions.)
Let us get back to NET.
I did not introduce the biblical note.
Over the past couple of years have NET made a trading profit outside of the servicing of their debts?
Yes, but the Deputy will appreciate that it is not really given to commercial people to isolate a charge on running a business and interest is a major charge on running a business so a profit before interest is an interesting accountancy concept, but the real profit is after one pays interest which is a legitimate cost of running a business.
The amount of money which the State is being asked to guarantee really restructures the loan, or guarantees the loan but there is the other point that going into a joint venture with a company like Richardsons appears to be probably a guarantee in the near future of a full manufacturing throughput in ICI's plants by Richardson's taking from them ammonia in particular. I am sure that Richardsons, looking at the costs of their own products, will be looking at world markets in terms of what price ammonia they can get. They are not bound in this joint venture to take any raw materials from ICI and whatever one they take will depend on price. This is not a panacea for IFI or for NET in that we are in a falling market, the demand for the product is falling. There are other companies around the world that have cheaper gas in so far as there is a utilisation of flare offs from oil wells to make cheap fertilisers. It is in this market that NET have had to trade over the past number of years, against falling demand. Europe is the greatest user of fertiliser in the world. The quota cutbacks in the CAP this year alone will reduce the use of fertilisers by at least 20 per cent in gross terms. Against this background I ask the Minister how safe is the guarantee and what chance has the State got of recouping the money for which it is now guarantor?
With regard to Richardsons, they will now get ammonia ex-Cork at commercial rates. It is important that both IFI and Richardsons get a good deal out of it. It is important that both companies prosper and create employment. I am happy that the arrangements arrived at with Richardsons are commercially sensible.
With regard to the Deputy's point about the world market for fertilisers, that is a point that was made on Committee Stage. It is all the more reason for NET to get into bed, as it were commercially with a company like ICI. NET and ICI together have the strength to take on rising or falling markets. Ireland is now truly in the fertiliser game in a real way.
That will be the quote of the week.
Yes, I hope it will be.
It is another variety.
There is a lot of it going around.
Ireland is in the fertiliser game in a real way with ICI. It was not really in the business once NET were allowed to limp along. I take Deputy McCoy's point. The winds are cold out there and the commercial landscape is difficult. Whatever chance ICI and ourselves have of tackling world markets, we had no chance of really making a breakthrough internationally because of the way NET were building up losses. That is the simple reality of it. I am very excited about the fresh start NET, its management and workers are now getting from this arrangement with ICI. However, it leaves us with an old problem which we are trying to clear up. All we have been arguing about here for perhaps three hours is whether the £30 million should be handed one way or the other. I have made the Government's position clear and I am not going to move on that. We can go on about it for the next few hours but I do not want to cut the debate.
I am afraid we will not go on like that. Before we move into the fourth hour I will allow Deputy McCoy a final question.
In relation to the joint venture, I want to ask the Minister if there is any binding performance put on Richardsons or is the only performance required of them that they would buy raw materials from NET when the price is right as against other suppliers.
They are part of the same company.
They are part of the same company. There is nothing binding on them.
Are they under the same man?
Yes.
Is the House happy——
Was the House ever happy?
——that we move on and make progress in that respect anyway.
I want to ask the Minister if he has been able to reflect in any way on giving me an indication as to the value of the mortgage on the gas contract and why that route has been rejected.
I would like to be helpful with regard to that but unfortunately I cannot be. This is linked with the gas price and discussing the NET present value of the gas mortgage invariably leads one down a road of discussing the gas price and into a stream where one can start to calculate things. For that reason I cannot accede to the Deputy's request.
Can the Minister say how the assessment was done of the relative value of a full State guarantee as against accepting the mortgage contract? Were the board of NET involved in any way in advising on whether one should go for a 100 per cent State guarantee or accept an unguaranteed loan, with the exception that there was a guarantee in the form of a mortgage on gas contract?
The latter matter was not one for the board; that was totally a State matter and the State decided that separately. The Deputy asked about the process we went through in arriving at the decision. The Government considered both options and because of what they regarded as the onerous nature of the bank route — that is, the additional charges for the interest and the request for the mortgage on the gas contract — they rejected that route and instead went for the direct State guarantee route which we are happy will be cheaper for the taxpayer in the long run. Considering that it is not our intention to run away from those responsibilities we decided we might as well face them and we reckoned that having to face them in any case we should face them in the cheapest possible way and the cheapest possible way is cheaper interest. That is the decision the Government took.
Let us assume that the House decides not to accept the Minister's recommendation and to opt instead for an unguaranteed loan, would the bank finance still be available on the other basis as indicated?
Firstly, the company need this money and, secondly, if the House in its wisdom decided not to go this route then obviously one would have to go back and talk to the banks. This would create massive difficulties for NET who now have a situation in place which is reasonably satisfactory to all the parties. Even though I know the difference between NET and IFI and that NET is involved in the State area, I have to stress that we have been negotiating this on and off for two years and this seems the most practical route, even if it is not the most ideal one.
I want to put strongly on the record that if the House was to take a different decision it would create massive difficulties for NET, the holding company. It would put us in a position where we would have to go to banks and we would be totally at the mercy of the commercial world. If we say "no" here we would have no bargaining power if we walked into a bank. We would be left in a position where we would either have to close the company or do any deal that the bank wanted to do. That would be a lunatic road to go.
Is the Minister asking the House, Deputy Keating, me and others who will vote on this matter, if a vote is called, to accept simply his commercial judgment in the matter?
No.
The Minister may be right; certainly he is paid to be right. Would the Minister be prepared to disclose to the Opposition spokesmen, not publicly, information on the calculations that were done in deciding whether it was better to go for a full guarantee or a mortgage on the gas contract? I do not believe it is commercially sensitive information and we should stop arguing about that. Assuming that it is commercially sensitive information and, therefore, assuming the Minister is asking the House to agree with him without knowing this information, is the Minister prepared to make that information available to us on a confidential basis so that we can at least satisfy ourselves after the event that we did not agree to something foolish?
I can see the superficial attractiveness for any Minister to relieve the pressure by agreeing to that but that would not make sense from a Government's point of view. Obviously one would have to consider which parties one would discuss it with and there is a question of Cabinet confidentiality and Government confidentiality. As I said, it has a superficial attractiveness and it seems almost unreasonable to reject it but reject it I must because it is a piece of string that once you start on it is hard to know where it stops.
It is quite normal for this to happen.
It is not my judgment, the judgment of the Minister for Industry and Commerce or the judgment of the Department of Finance: judgment is taken by the Government, acting collectively, on all the information available to them. We have made as much information available as we possibly can——
Which is practically none.
—— but we have stopped short of giving the hard core commercial information to do with the price of the gas and the value of the gas contract. That really is where we stopped in regard to the Deputy's questions. To stop there is Government policy and stop there I must.
The Minister is asking the Government to agree——
I think we have exhausted this topic. We are now in the area of speculation and we must proceed from section 1.
May I make one last observation? I will not go any further on this.
The Deputy will understand that the Chair takes him at his word, that this will be the last comment.
I am not pushed about precedent. Because 30 or 40 years ago some Minister decided, or more likely was instructed, to tell this House as little as possible, perhaps he may not have known the answers at the time — does not mean we should be bound forever by that decision. We are dealing with a unique transaction in a commodity for which there is no great competition in this country, in an international market place which is over supplied. A very convoluted process of supply and management has been set up to try to assist NET to cope in some way with its inherited indebtedness and so on. If the Government want to aid NET by making money available, then let them do so. That is what governments are for. However, there is no point in introducing a Bill in this House without giving basic information to which we can answer sensibly, yes or no.
We did not raise the question of guarantees initially. The Minister introduced the issue on Second Stage and left it hanging. The Minister said there were banks who would provide funding on an unguaranteed basis, but that the terms were unacceptable. While teasing the matter today we discovered that the unacceptable element was that the banks were looking for a mortgage. I presume the mortgage would have been related to the additional guarantees that were required. It may have been a sum in excess of that, because of the lack of guarantee, etc. but that would have been the linchpin. It is not unreasonable for us to expect some kind of feeling on that.
I do not suffer either from the advantage or the disadvantage of having been a Minister in this Department at any stage and therefore do not feel inhibited about it anyway. In the public interest it must be said that if public money is to be used it is not unreasonable to ask in broad terms what element of hidden subsidy from the taxpayer goes into artifically depressing the price at which NET receives the gas. There may be details of commercial confidentiality which should not be disclosed publicly.
There is no hidden subsidy here.
For IFI.
I did not say for IFI. I am talking about the subsidy which up to now has underpinned the capacity of NET to sell on to IFI. The chain of supply has an inbuilt subsidy prior to it being sold on from NET. There has to be and I want to know about it because otherwise I cannot make a judgment. It may be a commercial activity but they are using our money. I do not mind a person who is spending his own cash being unprepared to give details though such details are given all the time because the tax laws and every other law demand them but I would not be doing my job if, without setting parameters, I said, "here is £30 million, spend it how you like". I do not know how the Minister will deal with this question because if all the cards are put on the table the competition will know what is being done but there is a via media. Deputy Bruton has suggested one way. We must bear in mind that this issue has been discussed with dozens of people over the past two years and that it involves at least four entities in the chain of supply — banks and so on. These facts and figures are available. If I wanted to have details of them I could make a telephone call, but I do not want to find them out in that manner. The Minister has to come a little bit cleaner, otherwise he cannot expect our co-operation.
If I were to be asked tomorrow, if the history of this whole operation is anything to go by, or more likely in two years time when there is another debacle to defend my judgment, the only answer I could give for having agreed would be that the Minister is a very nice fellow who appeared to be telling the truth. By and large we thought the Minister was on the ball. The reality is that with the bland assurances given I have not a pup's chance of making a judgment. The Minister would not make a judgment on that basis; neither would I. No sensible person making a commercial or political decision would make a judgment on that basis. The Minister is on his own and I cannot stand by him as he has not given me a chance to do so. We have repeatedly prompted the Minister to give a little more information than he has given. He has said that he stopped short of giving full information but he gave us no information today.
I have given the information except for two named items.
The Minister gave no information.
I have given everything else.
The Minister admitted there was no blueprint or market research that he could refer to.
That information is true.
I find that slightly chilling. The Minister told us nothing about the elements of supply or the costings which the bank sought.
What other costs apart from that does the Deputy require?
I was hoping to get an evaluation of the mortgage the bank sought.
That is one of the two items I cannot give you. Apart from those two items what other information do you require?
They are the only two items which matter.
That comes back to my point which you are disputing which is that they are the only two points that I cannot give information on.
We cannot make a judgment without that information.
The House will appreciate that we must move on. The Minister has been cajoled and coaxed to give information which he says he cannot give. The Deputy has made the point and the Minister has indicated that he cannot answer it. We must accept that position.
I accept that the Minister may be bound by precedent in regard to the commercial price of gas. I accept that he is prebound but I do not accept that he is right, but there is no precedent for refusing to give an evaluation on the mortgage sought by the banks. That figure is a detail of the negotiations and it has not occurred before.
It is not a precedent, but commercial sense, which prevents me giving the figure.
I do not grasp that point. I do not see the reason.
What are we supposed to be exercising?
The Government have looked at the options in regard to gas and have concluded that it does not make commercial sense, as previous Governments have decided, to give information on the price of gas. The NET present value of the gas contract is an automatic extension. It is bound up with the same issue which is to get to the bottom of the gas price. I have been saying since 12.30 today that I cannot divulge the gas price to this House and that is exactly the position adopted by previous Governments.
Such statements remind me of the fact that we are wasting time and must move on.
With your permission, a Leas-Cheann Comhairle, I want to make further points.
Is it a new point or is it pertinent to the issue? It is rather late in the day for introducing something new.
When I get an opportunity I will have to study the record of what the Minister has just said. But as I understood it the Minister said something along the following lines: "the Government considered this matter. We reckoned we were not going to walk away from our obligations anyway and we came to the conclusion that the cheapest way of getting the money was to give a State guarantee." That seems to infer that the intention of the Government is to pay the banks back their money regardless of whether there is a State guarantee.
Would you consider not paying back the money?
I would consider only paying the banks in respect of what is guaranteed. If a State company borrows money from the banks which is not guaranteed then the banks are at risk in lending the money and the State is under no obligation to pay that.
I know the legality but we are talking about a sovereign State which, if it contracts a debt, be it guaranteed or unguaranteed, seeks to pay it back.
What then is the point of having all this legislation about guarantees if all the money is going to be repaid anyway? There was quite a sensation created about two years ago when the then Minister for Finance, now leader of the Opposition, Deputy Dukes, made a speech to The Irish Bankers Federation dinner in which he made it quite clear that from his point of view and from the point of view of the then Government, the Government guaranteed the repayment of guaranteed loans only and that other money that was lent to State companies without guarantee was not guaranteed. The only guarantee was the viability of the company. The Minister is now saying that it really makes no difference, that all the money will be repaid anyway, regardless of whether there is a guarantee. If that is the case we might as well give guarantees for everything.
Quite frankly, I find that amazing. There is a clear difference between a legal obligation with a guarantee as laid down in the Act and a commercial obligation. I do not think any Deputy in this House should countenance the suggestion that the State's full debts would not be paid——
These are not State debts, they are NET debts.
They are debts of a State company.
There is a difference.
It is wrong to suggest that with debts of a company owned by the State we should take one view of guaranteed money and another of unguaranteed money. All of that money should be repaid by the State company which is owned by the State.
Is the Minister saying that the State cannot benefit from the Companies Acts with regard to limited liability?
The Chair is saying that discussion on those amendments has concluded. Is Deputy Bruton pressing his amendment?
The Minister has made a serious statement.
Is Deputy Bruton pressing his amendment?
Yes.
Amendments Nos. 1 and 2 not moved.
Amendment No. 3 put and declared lost.
I move amendment No. 4:
In page 2, in the Table, line 19, after "£180,000,000", to insert "and that such guarantee or guarantees be decreased automatically in line with the actual amounts owed by Nitrigin Éireann Teoranta, at any given time, and that such amounts as then appertain be the uppermost limit of any such guarantees then in place".
Amendment put and declared lost.
Question proposed: "That section 1 stand part of the Bill."
This is the section which gives the guarantee.
The Deputy is not going to introduce repetition or additional emphasis on points already made.
None of us would dream of doing that.
That is what the Chair would expect and I only mention it in passing.
I am going to follow honoured precedents in this matter.
I had hoped the Deputy was making a case earlier for innovation.
It was not accepted at that time.
As the Chair knows, one can combine both. My concern in this debate has been heightened by what the Minister has said about the nature of guarantees. It seems he believes that even if we give a guarantee of £180 million under this section and NET then proceed to borrow £200 million, the State will be liable for the additional £20 million also. In my view, and I speak as a former Minister for Finance, that is not the case. The State is liable only for such debts as it has explicitly guaranteed. Certainly the company are liable for the full amount of the borrowing. The State, just as any other owner of a company, is entitled to the protection of limited liability which means that when a company is incorporated that company are responsible for their debts and the shareholders are responsible only for those debts to the value of their holdings in the company, unless somebody gives a personal guarantee or, as in this case, a State guarantee. This State guarantee is exactly the same as a personal guarantee given by the chairman of a company to get money for the company. It means that he has dispensed with limited liability. In the case of a State guarantee such as this we have set a limit on the extent of the guarantee that the State is giving to NET and that is £180 million. I hope the Minister will admit that he has not been correct in what he said earlier in this regard. So far as I am concerned, the taxpayers' liability will stop at £180 million regardless of whether NET borrow £200 million or £400 million.
The Deputy is legally correct.
I am not just legally correct, I am correct in policy and this was made clear by Deputy Dukes when he was Minister for Finance and speaking at the Irish bankers' dinner. This caused quite a ripple because many bankers had been previously working on the assumption put forward by Deputy Brennan that it did not matter whether there was a State guarantee, Uncle Alan or Uncle Ray was going to pay. I do not believe that is so. The State, in the person of the Minister for Finance, will only pay to the extent that he has given a guarantee and not a penny more. He is not legally obliged to pay, and should not pay, any more. Otherwise what is the point of having guarantees? Why would banks seek guarantees if the State is obliged to pay anyway? Bankers should take note that the Government are not obliged to pay, and should not pay, in excess of explicit guarantees. If the banks are worried about lending money they can come and look for a guarantee and the Minister can then come into the House and look for a further extension. If we are provided with the information we can then come to a judgment as to whether he should give that guarantee, something we are secretly being prevented from doing on this occasion. I hope the Minister will take the opportunity of clarifying the Government's position on this matter. It is putting him in a difficult position because he is not the Minister of State at the Department of Finance or the Minister for Finance.
I can handle it.
I hope that what the Minister has said is not Government policy.
Obviously, this part of the debate will be of enormous interest to the banking community and to semi-State companies in general, even though in the case it applies to NET. The Deputy is legally correct. I do not think the banks or the financial institutions should easily risk their money above the State guarantee. They should know that the legal requirement of the State is up to the limit of the State guarantee and after that if the State wishes, in the case of a company it owns, it can walk away. That is the legal position. I do not think any company that is fully owned by the State should set out to create the impression that they will not stand fully behind their debts, whether guaranteed or unguaranteed.
We all agree on that.
In that regard the State, in the first instance, should not encourage unguaranteed borrowings. The banks should beware of giving any borrowings and — I agree with Deputy Bruton here — they should be aware that they are exposed above the legal limit. But having said all that, I do think that when any State-owned company borrows money the State has a moral responsibility, a commercial responsibility, to ensure that its State companies do not get into debt beyond a limit that the State feels it can support.
In that regard the Deputy will be aware of an example he gave in regard to going from £180 million to £200 million. The Minister for Finance has to give approval for that kind of borrowing above the legal limit if it is cashflow borrowing or working capital borrowing. I do not intend to create the impression that banks can have a free ride and the State will stand behind freelance borrowing by semi-State companies, quite the contrary. Neither do I go as far as Deputy Bruton in suggesting that one should not automatically repay loans of a company that the State itself owns. The correct solution is to warn the banks to be careful, that they are exposed, that the State retains the option to use the Companies Act if it so decides but does not in advance say that it will not stand behind any particular debt. That would be the wrong commercial way to approach it. I hope that clarifies it because I certainly do not intend to write a blank cheque for financial institutions who lend to semi-State companies. But remembering that, apart from the legal obligations, if the Minister for Finance is allowing certain borrowing — and presumably the Government are supporting that decision — the State itself can easily walk away from such accumulated debts. It is a commercial matter and the State should behave commercially but should not, in advance, say it will not pay a certain debt.
But it is not giving a guarantee.
The Minister has introduced a most unfortunate note into the discussion. I have listened very carefully to what he has just said and I still do not quite grasp it. For example, his response was "you are legally correct". Is that to say that somehow "yes but" there is something else.
There are other obligations.
For example, the whole area of guarantees and company borrowings and so on are governed by the Acts relating to companies and it seems to me that it is either one or the other. If the State has a guarantee in place in respect of a company or institution or agency it has an absolute obligation to pay those debts in accordance with the terms of the guarantee. If the State does not have such a guarantee in place then the State has no obligation.
Should it walk away?
The Minister should not assume that is the corollary. The State has no obligation to pay debts incurred otherwise. The company involved has an obligation so to pay but let me say this much. Those companies involved should also have the same benefits and flexibility within the Companies Acts as other companies would have. I do not think there should be some kind of a soft underbelly in our approach to guarantees and borrowings by State or semi-State companies.
Nods and winks.
I happen to believe that that is the philosophy that is prevalent, that it permeates the thinking of the banking community and the thinking of many people who run semi-State bodies, that when it is all over and all is said and done ultimately there will be the taxpayer to pick up the tab, and that lack of sharpness of focus means that there is basically a whole nebulous "it will be all right on the day" philosophy about it.
Hear, hear.
And the Minister's instinctive reaction unnerves me because I do not think this is a matter for argument at all.
What unnerves me is saying in advance that one might walk away.
I heard nobody in this House today saying that anyone should walk away from debts incurred by a State company. What was said was that the State should not pay in respect of debts in respect of which there was not a guarantee, that the obligation is on the company or agency so to pay and that is where the prime obligation lies.
Who owns the company?
Who owns any company?
The company is owned by the shareholders of the company.
The State.
When people extend borrowings they do so on strict and clear conditions. The Minister said, for example, that the banks "should not easily risk their money". Nobody easily risks their money to anybody.
They should know they are exposed.
I think we are teaching our grandmothers to suck eggs in this case. Is the Minister seriously suggesting that a company like NET is going to easily attract substantial moneys from the banking institutions on the basis of some kind of nudge-nudge, wink-wink approach? Clearly there should be contractual documents in place in respect of which the conditions are explicit. I raise it because what it boils down to is a feeling that the Minister is reflecting a soft approach in this area. There is a lack of reference to the limited liability for limited companies. That is in place at present and there is a Companies Bill coming in here shortly but that extends also to some of the companies we will be talking about here. I take the view that to say something is legally correct with the begrudging emphasis which the Minister of State seems to be putting on it is implying more than it is actually stating.
I know it is unprecedented for a Minister to ask questions of a Deputy, but let me put this question. Are you aware——
The Minister will ask through the Chair.
Is the Deputy aware that there are many semi-State companies in this country that have unguaranteed borrowings and is the Deputy now saying that they should be publicly put on notice that no Government would stand behind those unguaranteed borrowings?
The Deputy will appreciate that treatment of the consideration and principles which obtain in respect of the State getting money is quite interesting and should be regarded as peripheral to section 1 of this legislation, but the Deputy accepts that it is not one that is due for resolution on the section, nor is it likely to be resolved on the section, and because of that he will accept that we do not seem to be spending our time gainfully in pursuing it ad nauseam.
In fairness, it was introduced by this House. I was asked a question. I do not think it is necessarily my place to have to answer it but, in broad terms, anybody who gives a semi-State body money does so on a clear understanding, usually on a contractual document; the terms of that document are the terms for repayment. If they incorporate a State guarantee then there is a State guarantee in place and if they do not then there is not. It would be far more helpful in getting the support of this side of the House in terms of extending more largesse in respect of this Bill——
It is not largesse.
I see it as largesse.
It is giving NET a fresh start.
I heard this phrase "fresh start" a number of times today. I am almost afraid to say the two words.
Deputy Keating should not be encouraging——
The Minister should not provoke me.
He is using the management jargon from all these trips he has been having with the IATA.
I have had no trips with the IATA.
I am sorry. That was most unfair.
It is a fresh start in one sense certainly but it is still unfortunately masking a huge problem of inherited debt which will not go away. I am simply saying that, by and large, I would be happier to hear the Minister saying that there is a tough regime in place in respect of State guarantees, that people should not assume that even if there was not a guarantee in place nevertheless somehow when all the dust has settled the taxpayer will pick up the tab anyway.
No.
I am saying that is not the way I see it and that is not the way the taxpayer is seeing it and he is getting very sick of it.
I agree with the Deputy but we should aim to pay up if at all possible.
If I could trespass on the undoubted generosity of the Chair.
One brief question.
So flattery does get you places.
For the Minister of State to say that because the Minister for Finance has approved borrowing constitutes a guarantee of repayment——
It does not. I did not say that.
——is just the same as for him to say that for a shareholder to participate in a vote at a meeting of a company which approves a loan means that he is personally liable.
The Deputy is right. I did say that.
It should be made much more clear than the Minister of State has made it in this debate, that the only situation in which the Minister and the Government have an obligation, moral or legal, to pay is either where there is a guarantee or where they approved a loan knowing that it was likely that the company would not be able to pay it and that, therefore, they were essentially conniving at the borrowing. If they gave approval in good faith thinking the company could pay it, and subsequently the company could not pay it, the State is not either morally or legally liable in my view.
I agree with the Deputy.
Let the Minister not say "but".
I had ended my sentence. I agree with the sentiments expressed by Deputy Bruton. Let us just take the following analogy. You would not say to a private company that they must set out from day one to guarantee a certain bulk of their debt. Whatever they can wheedle out of the bank by, say, unauthorised overdraft, we would not say to private shareholders of the company that if that company failed, morally they are bound only to pay the legally guaranteed amount and that morally bound in respect of the large overdraft the bank manager did not notice and which was run out.
What about company law?
I know very few shareholders that would pay out company's liabilities.
That is tantamount to advising owners of private companies that they should set out from the very start to make it clear that they are not in any way liable, morally or commercially, for debts beyond their legal entitlement. We would give the opposite advice to directors of companies, or try to, anyway, saying that there is a legal limit but there is also a moral obligation.
Well, of course.
We all accept that.
You assume in good faith and you still go wrong.
I am not saying that the State stands behind unguaranteed borrowings — it does not or cannot do that. The legal situation is different. I am saying that no company, private or public, should set out on day one to run up debts that their shareholders will not or can not stand behind, or are not interested in standing behind.
I say that this matter warrants a debate all on its own.
Notwithstanding the reservations, I am putting the question.
Question put and agreed to.
SECTION 2.
Question proposed: "That section 2 stand part of the Bill."
I give notice that I wish to move an amendment on Report Stage to limit the duration of applicability of this Bill which will arise on section 2. I am merely giving notice for order purposes.
Question put and agreed to.
Title agreed to.
Agreed to take remaining Stages today.