I move:
That a supplementary sum not exceeding £1,450,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December, 1988, for the salaries and expenses of the Office of the Minister for Industry and Commerce, including certain services administered by that Office, and for payment of certain loans, subsidies, grants and grants-in-aid.
This Supplementary Estimate arises because of additional expenditure under the currency exchange loss subhead, and the need to provide additional funding to Eolas, KDW and IPC. The total involved is £5.9 million but this is reduced to a net increase of £1.45 million by savings arising in relation to departmental salaries, the IDA and SFADCo capital allocations, the Market Entry and Development Scheme operated by CTT, and increases in appropriations-in-aid.
An additional £3.410 million is required in relation to the currency exchange loss allocation, which is intended to meet the cost of exchange losses arising from the foreign risk cover provided by the Exchequer in respect of certain of the Industrial Credit Corporation's foreign borrowings for industry.
Expenditure in this area is influenced by a number of factors, principally the level of foreign borrowings, the repayments due and the difference in the exchange rates at the time of the drawdown of the loan and the exchange rates prevailing when repayments are due. Because of these factors, it is difficult to forecast accurately the level of expenditure required under this subhead in any given year.
The principal loan schemes in respect of which my Department cover ICC for exchange losses are: (i) The European Investment Bank Scheme, through which ICC provide loans to small and medium manufacturing firms for fixed assets investment; (ii) The working capital loan scheme, through which ICC provide loans for working capital for small and medium manufacturing firms; (iii) The working capital for exporters scheme, through which ICC provide loans for working capital for small and medium manufacturing firms to expand and open up new export markets; and (iv) general purpose foreign borrowing, through which ICC provide long term loans to Irish industry for various purposes at commercial Irish interest rates, rather than at concessionary rates, as with the other schemes.
Additional funding is required in 1988 because of the following factors: First, the need to include losses from a World Bank scheme, which was established some years ago to aid development in the industrial and wholesale distributive sectors. Losses under this scheme were dealt with previously by netting off losses against amounts owed by ICC in respect of Central Fund advances. The interest now payable to the Exchequer by ICC each half year is reducing, and is no longer sufficient to cover exchange losses on the World Bank scheme. A sum of £750,000 is required in this regard; Second, the adverse exchange rate movements against the IR£ since July 1987 when the 1988 exchange loss forecast was made. The additional amount required in 1988 for this reason is £1.2 million; and third, the fact that ICC were unable to complete the detailed analysis necessary to make a claim, for £860,000, under the working capital loan scheme by the end of 1987; and, finally, a re-evaluation by ICC of losses under this scheme in 1988 resulted in an additional requirement of £600,000 this year.
It is proposed to provide an additional £1.8 million to Eolas. Deputies will be aware that Eolas was established in January of this year under the Science and Technology Act, 1987, which effected the merger of the National Board for Science and Technology and the Institute for Industrial Research and Standards. Eolas inherited an accumulated deficit from the IIRS of the order of £1 million and the supplementary grant being proposed here today is intended to clear this deficit and to provide necessary additional funding for the agency's 1988 operations. This will place Eolas on a sound financial footing and will enable them to concentrate their energies on the important and fundamental part they have to play in our economic and industrial development.
The Government decision to establish Eolas was based on the view that a strong and well developed scientific and technical base, integrated with industry, is essential, if Ireland is to be economically successful in today's keenly competitive, high technology world. Eolas was intended to be a vital element in creating the proper and most effective framework in which the development and expansion of our industry, through science and technology, can take place. Over the last 12 months, the agency has made considerable progress in gearing itself up to effectively perform its role. I would like to take this opportunity of thanking the chairman and members of the board and the staff for their efforts in bringing this about.
As one would have expected, the past year has been a difficult one for the agency. There was a need for large-scale reorganisation and relocation; staff numbers had to be slimmed down to make the new body more cost effective and to eliminate duplication; priorities had to be reassessed in the light of Government policy and resources had to be marshalled towards more effectively meeting the essential technological needs of Irish industry.
With 1992 just a short time away and the opportunities and challenges of the European internal market becoming ever more pronounced, it is my belief that indigenous Irish industry needs to concentrate on raising the technological level of its operation and, thereby, producing higher quality products which can stand the heat of the competition which 1992 will bring. Eolas is the agency which can best help Irish industry in this regard and I am glad to say that they have made a very worth-while beginning in this task.
The functions of the agency are wide-ranging, some operated on a commercial basis and some in an industrial development mode. It promotes and co-ordinates national investment in science and technology; it seeks to optimise European Community funding for science and technological research in Ireland; it provides a national technical information service; it provides technical consulting and testing services; it monitors industrial research and development projects and it operates national quality and standard programmes. The Government see these services as being vitally important to Irish industry and are providing the necessary resources to Eolas to deliver them in the most effective way.
The agency is also responsible for the management and execution of the programmes being funded under the Government's science and technology development programme. The programme was set in train in 1987 with a budget of £3.1 million, was funded to the same extent in 1988, and will have a budget of £8.2 million in 1989. The programme is spearheading niche development in a number of key areas such as biotechnology, advanced manufacturing technology, microelectronics and in 1989 will be initiating programmes in other areas. The common theme running through all the actions funded in the programme is the transfer of new scientific and technical knowledge to Irish industry to enable it to compete and to develop new jobs.
As I have said, Eolas has a key part to play in implementation of Government policy in this area. It also, of course, has a key advisory role in the development of policy. In this regard, I might mention that the agency is currently putting the finishing touches to a draft strategy for science and technology in the nineties. This programme will be especially related to the exploitation of science and technology in support of future industrial development. I expect to have this draft plan submitted to me early in 1989 and I, and my Department, will be giving it very careful consideration.
The proposed supplementary grant of £1.8 million is a very clear indication, I think, of the importance the Government attaches to the activity of Eolas and will be of considerable benefit to the agency in performing their tasks.
It is proposed to provide additional funding of £600,000 to KDW. On 3 June 1988, the Dáil approved a Supplementary Estimate to provide Kilkenny Design Workshops Limited with additional grant-in-aid of £250,000 to enable the company to continue trading pending the sale of their assets. This Supplementary Estimate was necessary, as the House was informed at the time, because of a serious deterioration in KDW's financial position which became evident in the early part of this year. The House will recall that, primarily due to losses in the London retail operation, as well as the operating loss incurred in Ireland in 1986, considerable trading debts and substantial liabilities in respect of bank borrowings had accumulated. The immediate objective was to stop the haemorrhage of losses and to realise funds for payment to creditors. This necessitated the taking of hard commercial decisions: to close the London shop; to sell the shops in Dublin and Kilkenny; and to dispose of other assets, including properties in Kilkenny.
The Government were anxious to safeguard, in so far as possible, the positions of the many small companies and craft enterprises which were owed moneys by KDW and it was considered essential that the disposal of assets should be proceeded with in an orderly fashion to maximise realisations, to provide a continuing outlet for craft goods and to enable the company to come to satisfactory arrangements with their creditors. The Government were also anxious that the shops, in Dublin and Kilkenny, which are important outlets for high quality, well designed Irish craft goods, would continue as such under new ownership.
The ambitious target of disposal of assets, while at the same time ensuring continuity for suppliers, is nearing successful completion. The sale of the Kilkenny shop in Dublin was by public tender and on 18 November it was announced that it is to be sold to the highest bidder, Blarney Woollen Mills Group. The group, who have some 285 Irish suppliers, operate very successful retail outlets in Blarney, Dublin and the UK, in addition to owning a knitwear factory and hotel and leisure complex in Blarney. Blarney Woollen Mills have undertaken to retain all 37 staff in both the shop and the restaurant.
The Government have at all times been conscious that KDW are an integral part of Kilkenny's culture and heritage and make an important contribution to the thriving tourism industry there. In particular they recognised that the KDW properties at Kilkenny, which KDW had restored to a very high standard over the past 25 years, were of special historical importance located as a cohesive unit opposite Kilkenny Castle, enhancing the tourist amenities there. It was the wish of the Government that the necessary sale of KDW assets in Kilkenny should not adversely affect or diminish these aspects.
This view was also strongly held by the people of Kilkenny who welcomed the announcement made on 21 November, that the ownership of KDW's properties in Kilkenny — Castle Yard and Butler House — was being transferred to a civic trust which is being established in the city. An acceptable cash consideration will accrue to KDW and the decision will ensure that the activities which are currently being carried out in Kilkenny will be continued and that the historic and aesthetic qualities of the complex there will be secured.
The outstanding debts of KDW, particularly trade debts and bank loans are in excess of £2 million and the sale of assets will go only some of the way towards clearing those debts. It is proposed that a further sum of £600,000 should be provided now to enable KDW to pay the more pressing debts.
Finally, it is proposed to provide additional funding of £90,000 to the Irish Productivity Centre. The centre's grant-in-aid for 1988 at £440,000 was £147,000 less than that provided in 1987. I have, been concerned about the effects of this cut on the business advisory and labour management services provided by the centre to industry. I consider that an additional £90,000 would enable the IPC to continue its very valuable work of providing subsidised management consultency services to small firms and of developing more effective and constructive human relations in companies.