Dáil Éireann debate -
Wednesday, 4 Jul 1990

Vol. 401 No. 1

Insurance Bill, 1990: Second Stage.

Minister for Finance (Mr. A. Reynolds)

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

It is somewhat unusual for a Minister for Finance to introduce an Insurance Bill. However, as the Bill is connected with the restructuring of Irish Life Assurance plc, it is appropriate that I should do so instead of the Minister for Industry and Commerce who has the more general responsibility for insurance matters and the supervision of insurance companies. Nonetheless, an important part of the restructuring will come within the purview of the Minister for Industry and Commerce in his capacity as insurance supervisor. I will return to this point in a moment.

The Bill does not deal with all aspects of the restructuring of the company. It is not necessary that it should do so. The primary function of this legislation is to enable the restructuring to take place and to allow the Minister to fulfil his part in the process.

A new corporate structure will be put in place in order to implement the proposed restructuring of Irish Life. This involves the setting up of a holding company for Irish Life, referred to as Holdco, and the creation of a sister company to which the business of Irish Life will be transferred. Irish Life will eventually be wound up. The Minister and the other shareholders in Irish Life will exchange their shares for an equivalent shareholding in the new parent company, Holdco. There will be provisions in the Articles of Association of the new companies allowing for a more realistic dividend to be paid to shareholders necessary for capital expansion.

The approval of the courts in Ireland and the UK is necessary for the transfer of business of Irish Life of Newco. The courts will have to be satisfied that the rights of existing policyholders are not being diminished and will have before them a detailed scheme for transferring the business, which will be drawn up by the actuary of Irish Life, and reported on by an independent actuary. The object of this scheme will be to ensure that the interests of policyholders are not compromised by the restructuring. The insurance regulatory authorities in the UK and Ireland will also be consulted in the restructuring process.

Before going into detail on the mechanics of the matter and the provisions of this Bill, it is essential to outline the background to the proposed restructuring and the complex issues involved.

Firstly, it is necessary to describe the current position of Irish Life and to look back to the origins of the company. This is important when considering the future of the company after restructuring. Irish Life are of major commercial importance not only in their own right but to the very many people in this country and elsewhere whose savings and pension provisions are under their control.

In the past 20 years Irish Life have grown at very rapid rate and have become the main life assurance company in the State with almost 40 per cent of the market. Total funds and reserves at end-1989 amounted to £4.5 billion. The company operate in Ireland and the UK and have expanded into the US markets.

The Minister for Finance owns 90.25 per cent of the shares of the company. The remaining shares are held by Irish Life's own staff pension fund, 5 per cent and a variety of private shareholders. The present status of Irish Life as a Stateowned company arises from the insolvency of several small life assurance companies in the 'thirties. The Minister for Finance, on behalf of the Government, contributed just over £1 million in 1938 to making good the deficiencies in the funds of the insolvent assurers. The Minister for Finance subsequently acquired a controlling interest in the company now known as Irish Life Assurance plc.

The ownership of the company came about through historical accident. It was not a conscious decision to nationalise life insurance in the State but rather an ad hoc solution to a problem of an insurance insolvency. We have seen such arrangements recently in the insurance field. In both cases, however, the ongoing business of the companies was transferred back to the private sector within a relatively short period.

Irish Life have remained in State hands but have been run with the minimum of State involvement. The company have operated for all intents and purposes as an insurance company like any other. They are not guaranteed by the State in any way and look to their own resources to meet the statutory EC solvency requirements applicable to all life insurers. The company have never had to rely on State funding since their inception.

I find it necessary to underline these facts to assure those who feel that a change in the State's shareholding will in some way affect the security of policyholders. It will not. I say it also to counteract those who might argue that Irish Life are a company controlled by the State whose investment policy can be directed by the State for particular policy reasons. They are not. We are dealing with a financial institution in State ownership which can easily, and, it will be argued, can more readily be run without the need for a majority State holding.

Irish Life have been a remarkable success due to the efforts of their staff, but it is not sufficient to rely on this past success. We must look to the future of the company. The Government believe that the company must develop as an Irish-based international financial services company specialising in long-term insurance and savings. Key elements in achieving this strategy have been the continued development of the Irish and UK business, the acquisition of a US life insurance company and the development of links with other EC life insurers.

There is, however, a crucial impediment to implementing this strategy. Under the present corporate arrangements, profits are largely locked in and cannot be distributed to shareholders. Expansion is, therefore, limited by the level of retained profits and reserves. While a capital injection is not an immediate, or short-term need, access to capital will be vital in the future. The development of new markets takes careful planning. To undertake this expansion, the company must be secure in the knowledge that they can raise the capital as required.

To overcome these difficulties, Irish Life put forward proposals for restructuring which would make it more attractive for investors to provide additional capital. This restructuring would also allow the sale at a realistic price of part of the State holding. The Government agreed in July 1988 that Irish Life should be restructured to facilitate their development as an Irish-based institution in the financial services area.

The Government also decided to appoint a team of consultants to examine the particular proposals put forward by the company and to review the options open to the Government in relation to the State's shareholding in the company after restructuring.

The consultants examined the operations of Irish Life and identified the strategic options available to the company in developing into international markets. The consultants pointed out that Irish Life are competing across a broad spectrum of financial products with other major international insurance companies and the life assurance arms of the domestic banking groups. As quoted companies, many of Irish Life's competitors have access to very substantial resources throughout the entire range of debt and equity markets in order to fund expansion at home and abroad. The consultants confirmed that the company's capacity to do so is limited and that access to equity markets for new capital was a key element of any viable competitive strategy for the company.

Having examined the scheme put forward by Irish Life, the consultants agreed that it represented the best practical solution to the problems outlined above. The consultants put forward a number of options for the State holding in the company. All of these involved the sale of the majority of the State's shares and one option proposed a complete sale of the State's shareholding in the company.

The Government considered the consultants' reports. I met the main union representing the staff of Irish Life and the Irish Congress of Trade Unions. I listened carefully to their views and concerns particularly as regards employment. I had discussions with the chairman and the managing director of the company and received clear assurances on employment. I should point out that Irish Life have consistently expanded their work force in the past ten years and I have every reason to believe that with restructuring they can continue to do so.

Having examined the options for the development of the company, I announced last March that the Government had decided that the restructuring should proceed and that the State's holding should be redused from 90 per cent to 34 per cent through a sale involving a public flotation of the company's shares. This will mean that the State will no longer have majority control but will retain a substantial shareholder interest in the development of the company. This holding will be maintained for the foreseeable future but it will always be open to the Government to consider the size of their holding from time to time in the interests of the company and the wider public interest generally.

This decision represents a fundamental change in the status of the company, a change from State control to a more widely diffused ownership. From a general viewpoint, there is no overriding reason why the State should own a life assurance company. The arguments which are normally used to justify State involvement — i.e. the existence of a natural monopoly, the absence of potential private investment capital, and overriding social and strategic interests — do not apply in this case.

The returns which the State has earned by way of dividends from the company are very small e.g. £440,000 in 1989. A sale of the Minister's shareholding following a capital restructuring will yield a significant capital gain which can be used to benefit the Exchequer. Furthermore, the retention of even a small share of the restructured company can be expected to yield an annual return in dividends which will easily exceed those received from the 90 per cent holding in the present company. Disposal of the Minister's shareholding and the consequential freeing of the company to raise additional private sector share capital will provide the Irish public with an opportunity to invest directly in a successful Irish company.

The Government acknowledge the importance of Irish Life and the investments they control. It is essential that Irish Life should retain their Irish ethos and their local base. To maintain this ethos and to avoid unwelcome takeover of the company, provisions will be included in the memorandum and articles of the new holding company to limit the percentage of shares to be held by any one private shareholder, or consortium of shareholders, to not more than 15 per cent of the total share capital. A special share will be held by the Minister for Finance to enforce this limitation and the arrangement will continue in place for at least five years after floatation. The company are in favour of this arrangement which I believe will be generally welcomed. This special, or golden, share arrangement will reinforce the interest being retained through the 34 per cent holding. As Deputies will know, such special shares are a common feature of sales of State assets in other countries.

I believe that the Government decision in relation to Irish Life is a balanced and reasoned response to the needs of the company. We must build on the strengths of the successful firms here in developing the economy. I am convinced that the plans now being made by Irish Life will not only protect the company's position and that of their staff, but will lay the foundations of continued success and expansion. We will need to reply on the skills and expertise of companies such as Irish Life to ensure that the fullest advantage can be taken of 1992 and the opening up of financial markets in the Community.

I know that the staff of the company wish to participate in and facilitate this success. The union representatives have expressed to me a desire for employee share schemes and I will be anxious to address this aspect in planning the flotation. There are many difficult tasks for both staff and management. It will be important for the company to develop their management skills further to take advantage of the opportunities afforded through flotation. This will be the key role of the new chairman-designate of Holdco, a task which I am confident will be undertaken with efficiency and effectiveness.

The restructuring of the company will be a complex process and, together with the flotation, will take up to 12 months or more to complete. It will involve considerable devotion of resources by the company and within my Department. I will be appointing financial advisers to assist in the sale of the shares on the State's behalf, to plan and carry out all the necessary and detailed preparations for this sale, and to advise on the pricing and method of sale to be employed. For their part, the company will be assisted by advisers on the restructuring and the preparation of the various financial statements and prospectus required from the company in connection with the flotation.

I am hopeful that we will see in 1991 Irish Life successfully launched on this new and dynamic phase of their commercial life. I am hopeful also that the flotation will yield a significant return to the Exchequer. It would be inappropriate for me to speculate on the value that will be realised, for reasons I need not explain. The value of the shares will be ultimately determined by the market conditions at the time of flotation.

I now turn to the particular provisions of the Bill. Although the essential element of the Bill is to enable the Minister to acquire shares in Holdco, the opportunity is also being taken to clarify certain other matters of direct bearing on the restructuring of the company. Section 1 is the usual definitions section and calls for no particular comment.

Section 2 allows the Minister to exchange his shares in Irish Life for shares in the new holding company and to acquire by purchase, capitalisation, issue or otherwise any further share or shares in the holding company. The Minister may hold the shares or dispose off these by sale, exchange or otherwise as he sees fit. If it is necessary to acquire shares at any stage the moneys will be advanced out of the Central Fund. Any dividends and other moneys and the proceeds of the sale of shares of the holding company must be paid into or disposed of for the benefit of the Exchequer. Section 3 provides that the Minister may exercise all their rights attaching to his shares in the holding company including, where applicable, the exercise of those rights by attorney or proxy.

Section 4 deals with the allotment of shares and empowers the Minister to appoint nominees and to transfer shares to such nominees to act on his behalf. The section sets out the rights and duties of nominees and the power of the Minister to issue directions.

Section 5 to 8 deal with matters arising from the transfer of Irish Life's business to their new sister company, Newco. The overall purpose of the sections is to ensure a smooth transition from one operating company to another once the insurance business is transferred by the court order. The new company must be able to continue the normal day-to-day operations of Irish Life without interruption.

Section 5 provides that the court order requiring or approving the transfer of property from Irish Life to Newco or any deed or agreement made under that order need not be registered under the acts relating to the registration of deeds or title or under the Companies Acts. This will remove the need for the title to properties to be re-registered individually.

Section 6 provides that every person who was an employee of Irish Life immediately before the date of transfer of the business from Irish Life to Newco will become an employee of Newco on the same terms and conditions. The section also provides for the transfer of pension and superannuation rights and gives effect to certain changes in pension schemes introduced by Irish Life in 1979 as if those changes had been registered at the time under the Perpetual Funds (Registration) Act, 1933. Existing pensioners of Irish Life will transfer to the new scheme in Newco without any loss of benefits or rights.

Section 7 permits the new company to act in place for Irish Life as trustee, or in any other fiduciary capacity, in regard to any trust, settlement, covenant or agreement that empowers Irish Life Assurance plc to do so. Section 8 grants relief from stamp duty on any agreement, transfer, conveyance, assignment or lease whereby the business is transferred to Newco and provides that stamp duty shall not be charged on the vesting of property in Newco by order of the court. This relief is a common feature of group reconstructions.

Section 9 is new and is of general application to life assurance companies. It will enable a life assurer to hold up to 10 per cent of the shares of their parent company on behalf of their policyholders, provided that the shares in question are listed on a recognised stock exchange. The Minister for Industry and Commerce may vary the percentage by order and impose prudential requirements on life assurers covered by this section.

While Irish Life are not the sole beneficiary of this section, it will be of particular importance to the company. After restructuring and flotation, Holdco will be one of the largest companies listed on the Irish Stock Exchange. Other life assurance companies in the State will be entitled to invest in the shares of Holdco on behalf of their policyholders but, under present law which prevents a subsidiary having shares in its parent, Newco will be unable to do so. This would place Newco at a disadvantage compared with their competitors for investment business in the State. The consultants who advised the Minister on the restructuring of Irish Life recommended that this anomaly should be removed to enhance the value of the company on flotation.

Section 10 provides for the repeal by order of the Insurance Acts dealing with Irish Life Assurance plc. Once the restructuring is completed, Irish Life will be wound up and these Acts will no longer be applicable. Given that the full restructuring can only be put into effect after court approval, the repeals will take place on such dates and to such extent as may be specified in the orders. Section 11 deals with the laying of orders before the Houses of the Oireachtas. The orders will come into effect immediately but may be annulled by either House within 21 sitting days. Section 12 contains the usual citation and commencement provisions. The Act will come into operation on such day or days to be fixed by order of the Minister.

The Oireachtas Joint Committee on Commercial State-sponsored Bodies considered the restructuring and flotation of Irish Life in their comprehensive and detailed report on the company in 1988. I believe that it is fair to say that the committee, generally, listened sympathetically to the case being made by the company for restructuring and flotation. It was clear that all the Members of the committee had a high regard for the company as an example of a successful Irish enterprise and were keenly interested to see that success continue. I feel sure that Deputies here today will express similar sentiments of goodwill toward the company.

I know that the House will be eager to act in the best interests of the company and pass this legislation. I have taken some time to explain the background and need for the changes being proposed. I hope that Deputies will respond in a positive manner.

I recommend the Bill to the House.

Mr. Noonan

(Limerick East): I should like to thank the Minister for his detailed speech which expands on the provisions of the Bill and provides us with some of the information we require to understand the Minister's intentions for the remainder of the year, up to and including the flotation of a certain percentage of the shares he now holds in Irish Life. It is a great pity that the debate is to be curtailed and that the Bill was not taken earlier in this session so that we could have had an open-ended debate.

Even though the Bill is a very short one, and many of the sections are such that they will be dealt with rather expeditiously on Committee Stage, issues arise from it which are very important in themselves. They also have an importance in so far as they will by their very nature be establishing precedents on the attitude of the House, and that of the Minister and the Government, to the sale of State assets.

I know that people in the House — and outside it — have the view that one's attitude to this Bill is almost for touchstone of how one positions oneself in relation to economic issues, and questions of whether one is in favour of a more muscular State role in the economy or the privatisation of certain companies which are now semi-State, will be the subject of debate and possibly controversy inside and outside the House. My view is that these issues do not particularly arise from this Bill. A flotation of Irish Life shares must be approached in a pragmatic fashion; it is quite clear from many comments since the examination of the issues, that it is in the national interest — by that I mean in the interests of the Exchequer — and in the interests of Irish Life, their employees and customers, that such an initiative should take place. In that context, I welcome the Bill before the House.

I deplore the fact that debate is curtailed because the more important issues which will arise directly from a flotation of shares in Irish Life are not addressed in the Bill even though they will arise from its provisions. I should like to deal with some of those issues later. It would have been helpful — and might still be helpful — if the Minister would consider issuing a White Paper on the whole flotation of shares in Irish Life so that a better public debate will ensure and that the public are apprised of the key issues. There is an enormous misunderstanding in and outside the House of the issues involved even though they have been addressed before. Because it is the first major sale of a State company it would be in everybody's interest if the Minister approached it by publishing a White Paper in which the issues were clearly outlined.

This Bill, by its very nature, is enabling legislation where the issues are quite confined. The Minister expanded on the issues in his speech but very important questions have not been dealt with which will take us from the debate in the Houses of the Oireachtas through the debate in the courts; through the submissions made by the regulatory authorities here, in the Department of Industry and Commerce and the Department of Trade in the United Kingdom; through the input of the actuary who will represent the interests of the "with profits" policy holders up to the point of the flotation, its manner; the whole issue of the golden share to which the Minister referred; whether the flotation will be a once off, whether it will be on an instalment basis or over a period of time; whether the flotation will be confined to the Dublin market, to the Dublin and UK market; whether the 15 per cent ceiling which the Minister intends to put on the amount of shares which can be held by an institution of individual is the appropriate ceiling; and the implications of all these matters.

A major area of discussion will now open up in regard to which the public lack essential information. It is very important — as this is the first sale of portion of a State company — that it is done right, without misunderstandings, and that it will be a successful flotation. I ask the Minister to consider the publication of a White Paper which would deal with those issues. I understand that if and when this Bill passes through the Houses of the Oireachtas the next phase will be the submission to the courts of an actuarial scheme prepared by the Irish Life actuary which will have to go through the courts in Ireland and the United Kingdom. There will be an input from the sources I indicated and there will be time, between now and the end of the year, for the Minister to publish a White Paper to deal with the issues so that when it comes to the flotation some time in the first half of 1991 the public will be in possession of all the facts. In so far as this will be a kind of touchstone issue on where parties stand on privatisation and the role of the public and private sectors in a mixed economy, I should like to indicate my party's position.

In the last general election we published Election '89 — Putting The Country First, and under the section on institutional reform on page 33 we outlined our attitude to the sale of shares in semi-State bodies. For the purposes of clarification I will quote from it. We said we would make the following changes:

Fine Gael believes that the sale of shares in semi-State bodies would be beneficial once proper groundwork for such a move has been laid. It could be beneficial in the following ways:

It can strengthen the capital base of the company, thereby facilitating investment and expansion

It can involve employees directly in the success of the company through share ownership

It can sharpen the commercial management of the company

It can open up the opportunity of joint ventures in new commercial fields

At the present time it is necessary to sell shares because the Government is unable to provide the funds for the vital expansion plans in companies like Aer Lingus and Irish Life.

Fine Gael will immediately put in train the necessary preparations to sell shares in appropriate companies. The key elements in that preparation will be:

1. A clear definition of the social objectives which the company must continue to pursue and the basis on which any new commercial costs involved could be funded

2. The terms of a Golden Share Mechanism whereby the State could guarantee the protection of certain strategic national interests

3. Establishment of a system for ensuring that the market power of the companies is not used against the consumer's interest or fair competition

4. Putting the company in such a position of efficiency and profitability, prior to the disposal of shares, that the shares will realise their full potential value for the tax-payer

The proceeds of such share sales will be used to strengthen the capital base of the company or to reduce the debt, either of the company itself or of the State. They will not be used for current Budget purposes. Shares will be made available on preferential terms to the employees of the companies concerned. The size of the continuing State holding in any company will be a pragmatic commercial consideration. The important purpose is to achieve an incentive structure for key decision makers within the company which will maximise its commercial and the financial returns to the company itself, its employees, the Exchequer and its customers.

Fine Gael welcomes the policy statement of the Irish Association of Pension Funds which suggest that they, in particular, might wish to become involved in taking shares in some of the bodies named above. Pension funds, which represent the savings of Irish workers, would be particularly useful co-owners in important Irish State companies.

That outlines our position on the sale of shares in State companies. It is quite clear, while it is a statement of general intent, that those who drafted the statement had the issue of Irish Life very clearly in mind.

On 1 March 1988 a Private Members' motion was put down in my name. It was, "That Dáil Éireann calls on the Government to make an early decision to privatise Irish Life Assurance plc." In his reply, the then Minister for Finance, Commissioner MacSharry said that the Government would make an early decision but that they were not in a position to make it at that time because certain considerations had to be taken into account. Earlier this year the Minister, Deputy Reynolds indicated that the Government were proceeding and that 56 per cent of the company would be offered to the public or to public institutions.

The question of Irish Life has received quite a lot of consideration. The Oireachtas Joint Committee on State Sponsored Bodies in their first report to the Dáil recommended that the Government should take an early decision on the submission to the Government by the company. That submission sought the restructuring of the capital base of the company in a manner which would effectively lead to its privatisation.

I am glad the Government have introduced this Bill and that its provisions are along the lines sought when the company wanted restructuring. It will enable the company to expand their business internationally and at the same time enable the State to realise some of the shareholdings of the company for the benefit of the Exchequer.

Irish Life plc were incorporated on 15 March 1939 to carry on the business of life assurance, but the decision by the State to enter the life assurance business was not an ideological one. The Taoiseach of the day, as I said previously in the House, was no Hugh Gaitskill capturing the demanding heights of the economy for State companies. The decision was pragmatic. The private companies who were rolled together to form Irish Life were broke. The State came to the rescue to protect the policyholders and, when the State was in it, stayed in. The company prospered but the original decision was based on the same pragmatic criteria as involved the State in other areas of the company, those of the rescue and protection of the savings of citizens. The Minister referred to this in his opening remarks.

I do not think it necessary to go into the origins of the company or the composition of the constituent companies who in the first instance were taken over by the State, but it is important to remember that the initial State involvement in the insurance industry was for pragmatic reasons. If the State is now deciding to get out or partly get out of the company by offering shares to the public the same pragmatic considerations should apply. Even though I know the case will be made, I do not believe that this legislation is going to be the kind of basic law on how we approach the sale of State assets in the future. The flotation of Irish Life is totally different from flotations which may arise in other companies subsequently. Pragmatic considerations rather than considerations of ideology should apply here and we should approach the debate in that manner.

The Minister for Finance holds over 90 per cent of the shares in the company but little or no profit accrues to the Exchequer from this holding. This has been the case since the company were incorporated in 1939, but this situation was exacerbated in 1971 when, to enable the company to compete more effectively in the area of life policy with profits, the company were virtually mutualised. The company's capital structure was restructured in 1971, whereby the shareholders' entitlement to profits was reduced from 20 per cent to 2 per cent. To compensate the shareholders for this a sum of £1.6 million was paid to the shareholders and the Minister for Finance as the principal shareholder received the bulk of this. Issues arise from this which will be relevant when the scheme of arrangement prepared by the Irish Life actuary goes before the courts in both jurisdictions, here and in the UK. I will return to that later.

As a result of the restructuring of the company in 1971 they were run to all intents and purposes for the benefit of policyholders, with profits, rather than the shareholders. The principal module of business at the time consisted of with profits policies. The company were run for the benefit of the with profits policies. Under the company's articles the with profits policy-holders have a perceived right to 98 per cent of all the surplus it is chosen to declare for policyholders and shareholders and the shareholders simply get 2 per cent.

I am not criticising the decision made in 1971. It was the correct decision at the time. When giving evidence before the Joint Committee on Commercial State-Sponsored Bodies on 23 July 1986 Mr. David Kingston, Managing Director of Irish Life said, and I quote:

In this particular situation there was an actuary from the UK, an expert in this area, employed by the Government. The position has shifted somewhat since 1971. At that time the company was keen to become mutual because the with-profit business, giving bonuses to policy holders, seemed to be the core of the business. The business has changed somewhat in the last 15 years and the bulk of our business now is unit linked business where the investment performance goes to the policy-holder, what we call non-profit business. In other words the policyholder puts in his £100, we invest it on his behalf, we take a proportion of that for expenses, mortality risks and so on and he gets the rest. We make our profit out of hoping that we keep our expenses below what we are charging him and we hope that our death claims will be below what we are charging. This is not just true of Irish Life, it is true of the life assurance industry generally.

He goes on to explain that the nature of the business has changed. I believe that at present there are about 30,000 with profit policyholders in the company. More than half of those are in Ireland and somewhere between 10,000 and 15,000 are in the UK. It is essential that the company be restructured so that they-are not handcuffed in a capital structure which does not allow them to expand. That is the situation at the moment. Secondly, some benefit should accrue to the State.

David Kingston's comments are fair comment on the position in 1971, and I stress I am not critical of the question. Business decisions have to be made in the light of prevailing circumstances and it was the right decision in 1971, but the structure put in place then is not the structure for the benefit of the State, the benefit of the company, the benefit of the staff or the benefit of the policy holders, in 1990. Whatever ideological trappings are paraded across the Floor of this House in the course of the debate, at the bottom line the capital structure of Irish Life has to change anyway. Any commonsense person looking at the problem would have to say that we have to make the changes. The changes are necessary for two reasons which I have referred to briefly and which I now wish to expand on.

The present structure is inhibiting the growth of the company. Secondly, one of the largest and most successful multinational companies in Ireland is owned by the State but the Exchequer does not benefit directly from the success of the company. We own one of the biggest companies in the country as citizens of the country through the Minister for Finance's shareholding, and we get nothing out of it. That makes no sense when the structure is inhibiting the growth of Irish Life.

If it was a kind of general privatisation debate we would be looking at all the literature from the heritage lectures and various other places where we get loads of advice always on the benefits of selling off State assets, but many of those arguments do not apply here at all. Irish Life has always been run on commercial lines. The State has put in no capital since 1939. The State does not guarantee the company in any way. The State does not interfere in any way whatsoever in the day to day running of the company and, as Mr. J. P. Rehill, who was Chairman at the time the Joint Committee on State-Sponsored Bodies looked at the matter said, and I quote from page 112 of the report:

We trade and compete as a commercial life insurance company and unlike the other State controlled companies, do not fulfil any special role on behalf of Government.

There is no social role here. They are not being directed, like CIE used to be, to keep buses on certain routes for social reasons. They are not being directed, like the ESB, to provide rural electrification for everybody who demand it. Regardless of cost, everybody was entitled to a power supply so you had to provide 20 poles down the valley to the last house. There were no considerations like that ever and there was no attempt to establish policy for Irish Life either in this House or in the Minister's Department in a manner which did not allow them to act in exactly the same way as a private company would act. The chairman went on to say:

Our principal job is to provide the best possible returns to our policy holders — our shareholders are entitled to a tiny proportion of our surpluses. Shareholders have never been asked for money since the company was founded

I say these things at this stage so that you will appreciate that Irish Life is run as a commercial concern. Future planning and detailed running of the company in the competitive markets in which we operate in Ireland and the UK must be a matter for the board of the company and its management.

To sum up, Irish Life is one of the biggest life companies in the country owned by the State but run as a private company. The State has not put in any capital or guaranteed the borrowings of the company. It has not interfered in any way so that when the capital structure is changed the manner in which the company is managed will not change. All the arguments on either side of the privatisation scale suggesting that they will suddenly become a more efficient company because the shares have been floated to the private sector do not apply at all because the company have operated as a private company since their foundation and as they have gone from strength to strength, especially in the last decade, they are very much operating as a private company.

They have a large share of the Irish market and have gone into the UK market as well. They are at the stage now where it is bad for the company to have too many eggs in the one basket. They have over 40 per cent of Irish business; they have gone into the UK and are significant in the UK from an Irish perspective but are not significant comparatively in the UK, where they have 20 offices, and a parent insurance company there would have something like 300 offices. They would have a very small amount of the UK market but have the capacity and the ability to expand under a new capital structure. The UK market is so big that a small percentage share would be very significant even for Irish Life.

Another issue arises which inhibits expansion of the company. Some Governments, particularly the US Government, will not allow companies owned by foreign Governments to take over native companies, so the normal process of expansion of Irish multinationals by acquisition in the US is not a route which Irish Life can follow easily. I know that French insurance companies discovered a mechanism in the US for getting around this and that Irish Life have followed the same route, but there are still inhibitions on the scale of operation which can be organised in this way. I understand that the Irish Life subsidiary in the US is worth about £30 million or so; it is not a huge acquisition. The same considerations apply in parts of the continent — they certainly applied in Spain until quite recently — and that would be an inhibiting factor as well in the expansion of Irish Life.

There are reasons for a restructuring of Irish Life which arise not from considerations about privatisation but simply to take the handcuffs off the company to allow them to expand and become a multinational. The company dominates the Irish market at the moment. There is very little room for further expansion here. The company are significant in the UK market and have room for expansion there. They can expand in France or anywhere else in the EC under the latest EC Directives and it is probably the intention of the company to expand further in the US. To do that the company will require capital. The State will not provide the capital so they must be positioned to get capital elsewhere. At the moment because there are only 30,000 "with profit" policyholders it has been the custom of the actuary not to declare significant surpluses because "with profit" policy holders are entitled to the declared surpluses.

A significant amount of the profit of Irish Life has been put into a reserve fund. While the reserve fund provides the company with a source of capital for limited expansion, only a restructuring along the lines now suggested by the Minister will enable Irish Life to become a very big player in the European market. It is important that the company would continue to grow.

The company have given good employment for a long time. They employ about 1,800 people in good quality jobs. As well as that, with a new regime in Europe after 1992, only the big will survive, and only growing companies will survive. It is a question of Irish Life expanding and by acquisition becoming a major player in the UK and on the continent or, alternatively, being exposed to competition from bigger continental companies already in the country with them capturing the business.

The case is very clear for restructuring of the company so that they will have access to sources of capital which will allow them to put their expansion plans in place. The company do not have that access now and there is no possibility of having it without a restructuring of the company.

The State have had no direct benefit from Irish Life for a long time. There was a payment of about £1.4 million when the arrangements were changed in 1971 — there was some benefit at that time — but if we look at the company we see that various estimates give it a value of somewhere between £0.5 billion and£0.6 billion. It is unfortunate that the State has not benefited directly.

The Minister intends selling off 56 per cent of the company. As the Minister says, it is very difficult to put a figure on what that would be worth but the figures which the press have speculated upon are not too far wide of the mark — it is probably worth £250 million or £300 million. A sum of £300 million to the Exchequer is a significant input especially when done in a fashion which will be of benefit to the company. The money, in effect, is locked up and a long process must be gone through before the Minister can realise this benefit. I would like a commitment from the Minister before the end of the debate that the money gained will not be used for current expenditure but will be used to reduce the debt. To take £300 million from the national debt would remove servicing charges of about £24 million or £25 million.

Even though we are talking about a large capital sum, when one looks at the debt service side it is not huge when one considers the amount of interest being paid out every year to service the debt. The benefit of £25 million to £30 million each year to the Exchequer would at least give a start to reducing the size of the national debt. All that has happened up to now, despite the good progress that has been made, is that the rate at which the debt is increasing has been slowed down although the debt has been rising every year and will again rise this year by about £0.5 billion; the Exchequer return figures recently published will confirm that the debt will rise by near enough to £0.5 billion this year.

If there are ways and means of reducing the outstanding debt they should be used and if this is to be the first instalment in the sale of the State assets which will be dedicated to a reduction of the national debt, it is very welcome indeed. That is my party position, and the general background, and I will move now from the presentation of the Bill, because issues arise which are not clear and which have not been dealt with in detail in the Minister's speech, which should be dealt with by means of a White Paper so that everybody who has an interest will know the position and also because this is the first legislation which deals with the sale of State companies or shares vested in the Minister for Finance. A procedure should be laid down to be followed in future. It is important that the full story be told at the start so that the debate here and outside will be on the facts rather than idle speculation. The articles I have read by people one would consider well informed were totally off the mark so far as Irish Life are concerned. I am not speaking here about the opinions expressed in the articles but rather about the facts. There is a responsibility on the Minister to ensure that all possible information is made available.

As is clear from section 4, the courts will be involved. As I said, the actuary will have to present a scheme of arrangement on behalf of Irish Life. The key question to be addressed is how the with profit policyholders are to be treated and compensated for the change in the scheme of arrangement. When the company was restructured in 1971 98 per cent of the surplus, declared by the actuary, was given to the with profit policyholders. However they now only represent a very small tranche of the total business of the company. There are not that many precedents for this. When the schemes of arrangement were changed in France and the United Kingdom the rate of interest to with profit policyholders was affected but it is not clear how things will go. I presume the actuary in drawing up the scheme of arrangement will be generous to the with profit policyholders. If he is to be at fault he will be at fault on the side of generosity. The with profit policy-holders have rights which are enshrined in the articles of the companies since 1971. I presume the Minister, the actuary in Irish Life and the financial advisers have far more information in this regard than any of us in this house has, but, again, it is only fair that those of us debating the issue here, and the general public, have the same information.

As I understand it, when the actuary has put the scheme of arrangement together it will be submitted to the courts both here and in the United Kingdom as there are policyholders in both jurisdictions. The Minister in his speech indicated that it is unusual for a Minister for Finance to introduce an Insurance Bill given that the supervisory authority is the Minister for Industry and Commerce. Therefore the supervisory authorities in both countries, the Department of Industry and Commerce here and the Department of Trade and Industry in the United Kingdom, will both make submissions. It is also the intention that an actuary will be appointed, I presume by the company, to represent the interests of with profit policyholders and that he, too, will make a submission to the courts.

Courts are peculiar places. When people ask me in my clinics if they would be wise to go to court the advice I give them is that, if at all possible, they should avoid doing so. I know Deputy Taylor will be upset when I say that I always advise my constituents to stay away from solicitors, barristers and courts and to keep free of the law.

Mr. Taylor

That is the finest advice one could give.

Mr. Rabbitte

I do the same in my constituency but I have a closer reason for doing so.

Mr. Noonan

(Limerick East): I advise them to stay out of the hands of the law. Without getting involved in a general legal debate, suffice it to say that courts are very uncertain places. The Minister's financial advisers, the Department, the people at Irish Life and the actuary cannot be certain how the courts both here and in the United Kingdom will adjudicate on the scheme of arrangement put before them. Furthermore, all those who advise the Minister cannot be certain that the courts both here and in the United Kingdom will adopt the same attitude. They are two separate court systems and it is possible that the courts in the United Kingdom will adopt a different attitude to the one adopted by the courts here. Having regard to the fact that the profile of business written here is different from the one in the United Kingdom, effectively the respective courts will be adjudicating on two different issues. I understand that many endowment mortgage policies with profits were written in the seventies in the United Kingdom whereas many of the Irish Life with profit policies here were surrendered when people needed the accumulated savings from time to time. However it is very hard to surrender a policy which is tied to a mortgage. Therefore there are significant differences.

When the company was restructured in 1971 the existing shareholders were compensated for the additional benefits transferred from the shareholders to the with profit policyholders. At that time the Minister for Finance received £1.4 million which may sound like a trivial amount, relative to the value of the company at present, but it was probably full and fair compensation relative to the value of the company at the time. The people who represent the interests of the with profit policyholders will say that given the arrangement was made in 1971, the with profit policyholders should be entitled to a "divi-up" of the full surplus of the company and that the man now trying to sell 56 per cent of a shareholding cashed in his chips in 1971. I hope this does not happen. The case being made by the Minister is a very good one but the courts are very uncertain places. Given that the courts in both jurisdictions will have to decide on the issue separately, and the regulatory authorities in both jurisdictions will make separate submissions, it is not clear what will happen when the matter goes before the courts in the autumn. It is also not clear if it will reach the court by then. It is my understanding, despite the best efforts of the President of the High Court to shorten the lists, there are still significant queues. Has the Minister got a mechanism whereby he can jump the queue and put the scheme of arrangement prepared by Irish Life before the courts here or in the United Kingdom where there are still significant delays in having cases heard in the High Court? Given that the Minister wishes to put this Bill through both Houses of the Oireachtas in the next week or so and enter the lists in the courts with a view to having the case heard between October and December it seems that the timescale is quite short. At the risk of boring the Minister let me say that a number of issues arise which are appropriate to a White Paper, when, at least, people would see what the overall shape of things is.

I would now like to deal with the way in which the company will be floated. Those who fly the red flag will make reference to taking the company and handing it over to private capitalistic investors. Again, the Minister should deal with this issue by way of a statement or a White Paper. In what manner will the company be floated? Will it be floated on the Irish stock market only or will it be floated on both the Irish and UK stock markets simultaneously or, as was the practice in the case of the larger floatations in England, will tranches be distributed around the world with 5 per cent in Tokyo, 10 per cent in Wall Street, 3 per cent in Hong Kong and so on? The Minister's attitude to the sale of shares is not clear. Will the sale of shares be confined to Irish nationals and institutions?

That is a key question and if the Minister proceeds in this way he will not realise the full value of the company; its full value will be realised only on the open market. This is a key issue and it has to be addressed. Is it possible, in the Minister's view, for the Irish stock market to absorb a flotation of £300 million in the one week or will it have to be spread, as I said, to the United Kingdom or further afield? Furthermore, because of liquidity problems in the market and other technical reasons, would the Minister be in favour of an arrangement whereby the flotation would be met by way of instalments with one-third being paid now, another one-third in 12 months time and the final payment in 18 months time? I do not know what the answer to that is but the question should be addressed. Certainly all of us in this House who are debating the issue and who are expected to give the Minister statutory permission to proceed should have access to that kind of information.

Will the Minister confine the flotation of the company to institutions or will there be a sale of shares which can be subscribed to by ordinary individuals? The Minister will hold 34 per cent of the company, roughly 10 per cent is in private hands already, half of which is the Irish Life pension fund. In effect, only 5 per cent of the shareholding of the company is in private hands. I welcome the provision in the Bill which allows the new company, Newco, to purchase 10 per cent of the shares in Holdco. Irish Life are going back in and will take 10 per cent of the shares. I persume Irish Life and the Minister will try to place some of the shares with friendly institutions, by friendly I mean non-predatory institutions. The Minister has indicated that no one institution or individual will be able to hold more than 15 per cent of the company.

It is important that the Minister would spell out clearly how he sees the shape of the shareholding in the new company, how he sees the breakdown between Irish institutions and shareholders and foreign institutions and shareholders. If he has information to the effect that the main Irish institutions and pension funds will be taking up, perhaps, 30 per cent of the total, that Irish Life will take a further 10 per cent that other insurance companies may take another 10 per cent and in the heel of the reel we will be down to 5 per cent or 6 per cent held by individual shareholders. I have no doubt that neither the Minister nor Irish Life are working in a vacuum. I have no doubt that these issues have been discussed behind closed doors and that Irish Life and the Minister's Department have an optimum shape in their minds, after the flotation, as to who holds what.

While I agree with the principle of this Bill, to a very large extent it is merely enabling legislation and the consequential issues are more important than the issues on the face of the Bill. While some of the consequential issues have been dealt with by the Minister, many of the consequential issues are not touched on. Both for reasons of information on this flotation, and because it is the first which will provide a range of precedents for subsequent flotations, we need more information.

I would now like to turn to the issue of the golden share, to which the Minister referred in his speech.

Mr. Rabbitte

Call it the golden goose.

Mr. Noonan

(Limerick-East): Many commentators think that the 34 per cent share being held by the Minister after flotation is the golden share but of course it is not. As the Minister pointed out, the golden share will be effectively a ministerial veto enshrined in the articles of association of the holding company. I was surprised at what the Minister said in his speech because this golden share will no longer be an absolute hit. The golden share, according to the Minister, will have a finite period of, perhaps, five years. The golden share is, therefore, a temporary rather than a permanent mechanism to protect the interests of the State. That is a significant movement and it is given out to us as a statement of intent by the Minister but what seemed, from the Minister's press statement that he was floating 56 per cent of the company, to be a firm commitment to a veto to protect the interests of the company, the policyholders and the Irish Exchequer, is now a temporary mechanism. Perhaps the Minister is right but I would like to hear the arguments.

The first thing to be said about the golden share is that any qualification in the articles of a company which restrict the company makes the holding of shares by a private individual and institutions less desirable and, consequently, tends to reduce the value of the shares. There is no point in buying out a majority shareholding in any company if somebody with a minority shareholding has a veto over everything you can do. It stands to reason that the Minister must, in the area of the golden share, make a very careful pitch because he may affect the value and the attractiveness of the flotation by being over-protective and over-eager. It seems that the Minister for Finance will put certain provisions into the articles of association of the holding company. These provisions will allow the Minister a veto over certain undefined areas of activity for a certain period. He suggested this period might be five years. With respect I think this is very fudgy altogether, and I would like him to spell out the issue and to what extent the national interest can be protected by the golden share mechanism, as this is one of the key issues for all of us.

Mr. A. Reynolds

The Deputy had better read it again.

Mr. Noonan

(Limerick-East): The Minister will have the right to reply.

Mr. Rabbitte

That is not what the Minister told the unions.

Mr. Noonan

(Limerick-East): I must find the Minister's script here among all my documentation.

Mr. A. Reynolds

The Deputy had better look at it again, it is very clear. It is only a statement to say that it will not be changed in the first five years.

Mr. Noonan

(Limerick-East): In relation to the issue of the golden share I quote from the Minister's speech as follows:

The Government acknowledges the importance of Irish Life and the investments it controls. It is essential that Irish Life should retain its Irish ethos and its local base. To maintain this ethos and to avoid unwelcome takeover of the company, provisions will be included in the Memorandum and Articles of the new holding company to limit the percentage of shares to be held by any one private shareholder, or consortium of shareholders, to not more than 15 per cent of the total share capital.

That is fine, that is clear. We know what the Minister's intention is and I presume he will not have any problem such as they had with Jaguar in the United Kingdom. I presume he will be even handed between Irish nationals and members in other Community states and that he will have no problem with the ceiling on the shares. That is not the issue I am addressing.

Mr. A. Reynolds

I am well aware of that.

Mr. Noonan

(Limerick-East): It is the next part of the Minister's statement I am addressing where it is stated that:

A special share will be held by the Minister for Finance to enforce this limitation and the arrangement will continue in place for at least five years after flotation.

Mr. A. Reynolds

That is not what the Deputy is saying.

Mr. Noonan

(Limerick-East): That is putting a finite limit on the holding of the golden share or the holding of the veto. There would be no necessity to mention five years if it was the Minister's intention to have a permanent arrangement whereby he could exercise control indefinitely over the future of the company. The only reason five years is mentioned is that the Minister is now informing the House that this golden share is more likely to be a temporary arrangement——

Mr. A. Reynolds

I did not say that.

Mr. Noonan

(Limerick-East):——than a permanent arrangement, and consequently we would like more information on this issue. I know there is a long tradition in the Minister's party of legislation by kite flying. That kite is now up in the air and the Minister is asking the question: “Would I get away with confining this to five years.?” If he wants an answer from me he had better be more forthcoming with the information, because as it stands it does not look great. I understand the reason it is included is that he might frighten off the investors if he said he would have a veto over the running of the company by the person with the 34 per cent of the shareholding and this veto will last indefinitely. Once the Minister is limiting the total shareholding of any individual or company, or consortium of shareholders, to 15 per cent, he has got over that problem.

In order to ascertain what the Minister is doing we must examine the purpose of a golden share. If Irish Life were a company which had not operated under a commercial regime but, in effect, was like a Government Department going for the first time into the private sector, the golden share, would be very important for that reason. Suppose Telecom Éireann was being privatised but, instead of privatising it at its present stage as a very effective semi-State organisation, there was an attempt to privatise it directly at the time when it was run directly by the civil servants in the Department of Communications, there would be a very strong case for a golden share for a long time to protect a company unused to operating in the competitive commercial world; that would be a justification for so doing. Irish Life do not need that protection.

Since 1939 Irish Life have operated in the commercial world; their operations never have been interfered with by any Government. Consequently, that cannot be the reason for its privatisation. The reason must be to avoid take-overs; it must be a device to protect the company from predatory take-overs which would be against the interests of the company and the national interest. That is fine so far as that goes.

As a matter of fact when I stated my party policy at the beginning of the debate one of the conditions we introduced for the privatisation of companies in our election manifesto, 1989, under "Institutional Reform: General Policy" we had this to say:

2. The terms of a Golden Share Mechanism whereby the State could guarantee the protection of certain stragetic national interests ...

But this golden share mechanism which, in the Minister's press statement, was an absolute commitment to protect all our interests, is now becoming a temporary little arrangement——

Mr. Rabbitte

Like the Government.

Mr. Noonan

(Limerick East):——a temporary little arrangement for five years. That brings me back to the point I have made already. The Bill is an enabling one from which we are now expanding on a nod and wink basis whereas what we need is a White Paper in which all of the issues would be laid out in full.

The Minister went on to say:

The company is in favour of this arrangement which I believe will be generally welcomed. This special, or golden, share arrangement will reinforce the interest being retained through the 34 per cent holding. As Deputies will know, such special shares are a common feature of sales of State assets in other countries.

The special arrangement of a golden share got into great difficulty in the Jaguar case. I presume the Minister will so organise matters that he will not encounter the same difficulty here. But certainly a prerequisite will be that he will have to be even-handed with all shareholders whether they be native or foreign, national or residents of the EC countries. Any inhibitions which appeal to foreign shareholders must also apply to Irish shareholders. I am still fascinated by the movement which now suggests that the exercise of the golden share arrangement will continue in place for at least five years and, thereafter, will not be necessary.

To turn to the provisions of the Bill with regard to staff, maintenance of employment, security and so on, I must say they are very welcome. Probably they are unnecessary because I am sure all of that could be done by way of regulation anyway. But the fact that it is written into the Bill I am sure will be a comfort to and will allay any anxiety on the part of staff. That is no problem and I would support it.

In the course of his remarks the Minister talked in terms of a shareholding being dedicated to the staff. That is absolutely essential. I would not support this Bill unless there was a commitment to allocate some of the shares, in a manner to be agreed by the company and the trade union representing the workers within the company, to staff. At least 5 per cent of the total share capital should be allocated to the staff.

That brings me back to a little point I made already: if one starts dividing up 56 per cent, if Irish Life are to take 10 per cent themselves — as they would be entitled to do under a provision of this Bill — give the staff 5 per cent, with various friendly institutions taking various tranches and then the other insurance companies who have already expressed an interest taking a tranche each, at the end of the day, the shape of the shareholding could be very acceptable to everybody. But the Minister should come clean on these issues. He should tell us here what arrangements are being put in place behind closed doors at present of which those of us who are expected to agree this Bill are not being made aware.

Certainly the staff should be facilitated. One of the great problems in the growth of the State sector in this country has been the inadequate compensation to key staff members and all the problems arising therefrom: between the Devlin and Gleeson reports putting caps on the remuneration of chief executives, then the structures which ensure that nobody can get more than the chief executive, that there must be relativity right down the line to the hall porter, means we are left in circumstances in which highly successful State companies, such as Irish Life, are not in a position to reward their key employees.

We must acknowledge that Irish Life have been enormously successful. The insurance business is a people-centred one — there is no doubt at all about that — and it is the people in the company who have made it such a success and it is they who should be rewarded. This Bill affords an opportunity to reward them also by having shares in the company they have built into one of the great successes of the State sector here.

There is no point in giving staff shares unless they are allocated to them in a tax efficient manner. There is no point in holding shares for the sake of having paper in the blue jug on the dresser. I am sure it is the Minister's intention to put a scheme in place to allocate at least 5 per cent of the shares to the employees of Irish Life, done in a fashion which will allow them realise those shares in a tax efficient manner. Perhaps the Minister would address that issue also when replying.

I might deal with a point now not very relevant to the major issues in the Bill but which is a source of annoyance: who thought up the crazy new names? Could there be anything as inelegant as talking about Holdco, because it is the holding company and Newco because it is a new company?

Mr. A. Reynolds

These are provisional names only.

Mr. Noonan

(Limerick East): But they appear in the definition section of the Bill. I can appreciate that, naturally enough, when civil servants and employees of Irish Life were organising events, they used shorthand. But is the Minister saying that, when the flotation comes, it will not be a flotation in Holdco Holdings? The Minister will have to hire the Taoiseach's cultural adviser, Mr. Cronin, at a rate of £117 a day for at least a fortnight to think up more elegant names for the new companies. At present Holdco does not have a great ring to it but we might get used to it; Newco does not have a great ring to it either.

Mr. Rabbitte

What about Golden Gooseco?

Minister of State at the Department of Finance (Mr. Daly)

What about SFADCo?

Mr. Noonan

(Limerick East): I am waiting for the man who runs the temporary little arrangement to make his announcement. Then I will talk about SFADCo, when I hope the Minister of State will be on the same side of the argument. We will let that pass.

I gather it is not the Minister's intention — from what he says — to call them permanently Holdco and Newco, that they will have far more elegant titles.

Mr. A. Reynolds

They are working titles only.

Mr. Noonan

(Limerick East): The trouble about the working titles is that they are written into the only legislation which will come before the House in the course of this flotation. Since working titles happen to be the statutory titles, it will be difficult enough to have any other titles for them. I am sure the Minister will deal with this as well in his reply.

I have dealt with the main issues. I will summarise briefly what my attitude is. First, we have been pressing for this, as a party, for a long time. When we were in Government we took the first steps, with the agreement of the Labour Party, to examine the situation. The first Private Members' motion after the change of Government was on the privatisation of Irish Life. It was in my name and we strongly advocated in 1988 that this would be done; and we support the flotation of shares in Irish Life. It is absolutely essential for the future of the company that the capital would be restructured in this way, and it is absolutely in the national interest as well that a company which has been so successful would provide some direct benefit for Irish industry.

Where I part company from the Minister is in regard to the manner in which he is proceeding. There is a necessity for far more detailed information to be provided because this enabling legislation which allows the Minister to proceed is very much the tip of the iceberg. The main issues will arise in the courts and in the course of the flotation and we have very little information from the Minister on these matters. I advocated that the Minister would produce a White Paper and we could debate that in the House in the autumn when all the issues would be put before us. Whether by way of a White Paper or some other mechanism I would ask the Minister to produce a detailed document addressing all the issues and give us a commitment that we can debate that detailed document here in this House in the autumn before these matters go before the courts in the UK and in our own jurisdiction.

I would like to finish with some questions which the Minister might deal with. What is the position of the minority shareholders at the moment under the new arrangements? Will the minority shareholders, for example, be able to exchange their shares in Irish Life plc for shares in Holdco, and, if so, what provision of the Bill enables them to do so? Certainly the Minister's right to do this is enshrined in the main sections of the Bill but I cannot — and it is probably my own lack of perspicacity — identify where the Bill empowers the people who hold the 5 per cent minority shares, and indeed the Irish Life Pension Fund which holds 5 per cent as well, to exchange their shares for shares in Holdco.

The next issue is whether I am right in saying that the provisions which empower the Minister to buy and sell shares in the holding company apply to all the shares which he will hold in the holding company and that there will be no necessity at any future date, if the Minister decides to dispose of the 34 per cent which he holds, as well as the 56 per cent that he holds, to return to this House to get any kind of parliamentary permission to proceed. It seems that the Minister is now taking power to himself which not alone gives him the right to sell the 56 per cent, which is his stated intention by way of press statement, but to sell the whole lot if he feels like it. It seems the Minister is empowered to sell the whole caboodle without coming back here or even telling us what he intends doing. Would it be the Minister's intention to do that at the same time as the provision for the golden share no longer applies at the end of five years?

That is the situation as I see it. I have serious doubts about the procedure being adopted, that we should be debating such a key issue with whatever is the polite name for a guillotine motion hanging over us. I would prefer to have an open-ended debate. I have had plenty of time to state my views on Second Stage but this is the kind of debate where there are many people who would like very much to state their views on it but they will not have the opportunity to do so.

Finally, I will be supporting the Bill on Second Stage when the question is put at midnight tonight. I would like the Minister to seriously address the points I have made about how it will proceed in the autumn. To a large extent this is a Second Stage Bill. It is the principles that are important. I do not see major issues arising on Committee Stage in regard to what is in the Bill. Major issues do arise from what flows from the Bill, however, and I would like the Minister to see if he can meet my request to have a full debate based on detailed information on all the issues that flow from the Bill when we reach phase II of the process and the actuarial report goes before the courts and when we reach phase III of the process and the actual flotation takes place.

Mr. Taylor

The first thing that the people of Ireland have to take note of on this issue is that the Fine Gael Party agree with the Fianna Fáil Party and the Progressive Democrats that this very fine major asset which belongs to them is to be disposed of and sold off after all these years of building up. I have made the point on many occasions in this House, and indeed outside it, that on all crucial matters affecting the economy of this country, Fine Gael hold exactly the same views as Fianna Fáil and the Progressive Democrats. That is clearly highlighted here this morning by Deputy Noonan's contribution.

I want to put the Labour Party position on the record right away. We are totally opposed to this measure. We are totally opposed to the principle behind this measure. We regard this as a sell-out rather than a sell-off, a betrayal of the true Republican ideal that Fianna Fáil pretend to aspire to in this day and age. It is an outrage in what it intends to do.

There is a lot of sham being talked in this House here this morning by the Minister and by Deputy Noonan, as much sham as I have ever heard contributed in this House. Let us deal with one aspect first. This nonsense of talking about this measure as a restructuring for Irish Life should stop. Let us get away from these euphemisms and call it what it is. It is a privatisation measure to sell off the fine public asset of Irish Life to the capitalist backers of the big parties. Let us stop this nonsense about restructuring. Restructuring has nothing whatsoever to do with it.

I have listened carefully to every word that the Minister has said and that Deputy Noonan has said. I have read the material and I have read such reports as are available on it. I find the arguments put forward very unconvincing. They are put forward with such lack of enthusiasm or confidence that I doubt if there is any real belief in the arguments being put forward. The arguments are just a colour and a sham to try to give a cloak of respectability to what is really going on behind the scenes. I would say to Deputy Noonan that there is plenty going on behind the scenes. There are plenty of ready-up operations going on and plenty of people in institutions will become rich very quickly indeed as a result of what this House is discussing here today.

The whole issue can be encapsulated in two of the statements made by Deputy Noonan which have their mirror image in the Minister's own statements. The Minister said that Irish Life has to be sold off to the private sector because at present they are locked in a structure that does not allow them to expand. This poor little company, struggling, losing money, cannot expand, and are in great difficulties. On another occasion he said they are hand-cuffed. You would imagine the debts had built up and that the company were going into liquidation. What a load of rubbish. About three minutes later the Minister said the company have gone from strength to strength in the past decade and it is one of the great success stories of the last 50 years. Which is it? They cannot be so locked in and hand-cuffed that they cannot expand while at the same time be one of the success stories of the last 50 years. This is the kind of double think and sham that is being put before the House this morning.

It is nonsense to say the company have not been allowed to expand. They have expanded hand over fist and have done magnificently. They have built up their business, assurance, insurance, property development and all kinds of commercial activities. They have built up massive assets running to millions of pounds over the years. They have done brilliantly and it is nonsense to say they cannot expand. The Minister knows they have expanded brilliantly, and that is why the private sector want to get their hands on it. If they were doing badly, we would not be hearing about Holdco or Newco today. It would not be proposed that the company be handed over in Thatcherite fashion to the private sector who are waiting to get their hands upon it.

Another attempt to pull the wool over the people's eyes is the fact that the company have not produced much by way of dividends, having regard to the very valuable holding the country has in Irish Life. The Minister is a businessman who build up a successful business and he knows the score well enough. You can build up a business in varying ways. If you wish, you can pay the shareholders a dividend out of your profits and carry on with your existing capital or you can plough the money back into the business so that it will build up and expand in an ever-increasing way. That is what Irish Life did. They ploughed back their profits using the best techniques and skills of commerce in an extraordinarily successful way. They ploughed back their profits year after year, resulting in the very fine multi-faceted company Irish Life are today. That is the reason they have 1,800 employees.

If the Minister, or any previous Minister, had decided to slow that down in some way there was nothing to stop him doing so. He has a 90 per cent shareholding in the company. When annual general meetings of Irish Life are called there is nothing to stop the Minister saying it is time we got more out of this company, and that we ploughed back a bit less, that the company pay a dividend of £X million and put that into the Exchequer. It is debatable whether it is a good idea to do that or if the money should be ploughed back into the company. The Minister can do that at any time. He should not come into this House and eschew the argument that we have to sell off and realise our asset because we have not been getting enough by way of dividend. There is nothing to stop the Minister having any dividend he wants out of the company by the exercise of his 90 per cent fully-controlled shareholding. He could have done that at any time, and he can still do so if he retains control of this company.

What is so clever about having a fine asset and saying we are going to sell it off and transfer it into a once-off cash injection at considerably less than its worth? You do not gain anything when you sell off a very fine productive asset and take the cash. You are transferring one asset to another, and nothing more.

With the commencement of the debate in the Dáil today, the general argument about the privatisation of State assets in Ireland moves to centre stage. Let us be clear about this. The only purpose of this Bill is to enable the State to sell Irish Life to the private sector. The Government's decision in this matter and the decision made by the Dáil on this Bill will be one of fundamental principle. It is entirely unacceptable in that context that this debate is taking place in the absence of so much vital information about this company, about the principles involved and the consequences of change. In effect, this House is being asked to take on trust that the Government's intentions in the matter are entirely honourable. There is adequate evidence available which ought to make us deeply suspicious of the Government's intentions. For that reason, before dealing with the issues of principle involved I want to put the following on record.

In 1986 and 1987 the then Minister for Finance, Deputy Bruton, developed an interest in this subject, specifically the privatisation of Irish Life. I have in my possession a note of a meeting which took place in Irish Life on 11 December 1986 between officials of the Department of Finance and officials of the Irish Life company. In the course of that meeting the valuation of the company was discussed in some detail. The point was made at the meeting that "as regards valuation, the company have at present about £200 million of free reserves over the solvency margin which would be allocated between policy-holders and the company". I have also in my possession a letter written by an official of the Department of Finance two days earlier, on 9 December 1986. In that letter the official stated:

In recent years the company has generated substantial profits on its overall business and it was possible to declare an actuarial surplus which gave a reasonable return on the funds of the with-profits policies and sustain a growth in dividend payments while simultaneously accumulating significant hidden reserves. As a result, the company now has hidden reserves of the order of £300 million which it will shortly be obliged (by EC regulations) to disclose in its accounts. In the normal course of events, such reserves would be regarded as shareholders' capital, but because of the rights granted to with-profits policy-holders in 1971, the question of whether they have a claim on those reserves arises.

These two quotations, which I am quite sure are available to the Minister, raise serious question marks about the value of this company.

On 10 January 1988, for instance, the chief executive of the company was quoted in the Sunday Independent as placing the value of the company at between £100 million and £200 million. An analysis in the Sunday Press, on the other hand, on 31 January 1988 said the State was unlikely to get more than a few million pounds for its shares. On 13 March this year, after the decision had been announced, the general speculation in the press was that the value of the company was around £250 million. In The Irish Times on the same day, even though sources were estimating that the sale of the company could raise £300 million, the chief executive of the company was quoted as now admitting that there were about £500 million in reserves. This brings me to the point of this nonsense about privatisation being essential for the company to expand. Mr. David Kingston, the chief executive of the company, has been quoted as saying on many occasions and confirming that the company have £500 million in reserves and as such the group have no immediate need for funds and it was unlikely to tap the market for funds for up to three years after its flotation. What is all this about the great need of privatisation to enable the company to expand? The reserves are more than adequate for any expansion they would want to undertake and it is unlikely they would look for further funds for up to three years after flotation. Privatisation is not a prerequisite for getting extra funds. That is another canard.

There is a clear pattern in this speculation which we have seen in other countries. In Britain public companies have been routinely sold off at less than their value and speculators who were in on the ground floor were able to make a killing within days of trading their shares. It is clear that this House is being asked to approve the privatisation of Irish Life without being given any clear idea of the value of the company or the sale price. As the elected representatives of the people we are the owners of that company. It is absolutely scandalous that we should be asked to make a major decision of this kind without any information about the implications of the decision for the Exchequer.

Deputy Noonan asked whether the Minister will be entitled, following the enactment of this legislation, to sell the entirety of Irish Life. The answer is yes. The Minister will be able to do what he likes with all the shares the State owns in Irish Life without the necessity of coming back to this House for permission of any kind. What he is undertaking to achieve is mind boggling.

This is not a privatisation Bill; it is a Bill by which the Minister arrogates to himself alone the right to do what he would wish with all or any of the shares of Irish Life. He could sell the 34 per cent as well in whatever way he wants. There is no provision for coming back to the House for authority. He is not telling the House what price he expects to get, yet he seeks the imprimatur of the House, which Deputy Noonan and Fine Gael are happy to give. He is to be given power to sell off all the State shareholding in Irish Life without referring to this House with regard to the sale price or the proportion of the shares. He is taking the power with the consent of Fine Gael and the Progressive Democrats to do all that upon his own imprimatur. This House will be finished with the issue when the Bill is passed by the Dáil. The elected representatives here will have no further say in regard to the sale of Irish Life. There is no second chance. The power that rests with the Dáil will be handed to the Minister for Finance who will have no further recourse to this House in this matter.

The Minister for Finance has been a businessman in his day. I can well imagine his reaction if we proposed to sell his business without any valuation being made and without any indication of the sale price. Because the Minister has a reputation as a successful businessman I know he would not agree under any circumstances to sell his business without knowing its worth and what he might realise from the sale. Yet that is precisely the decision he is asking us to take in respect of one of the largest and most profitable State assets.

If we were to realise as much as £300 million from the sale of half the State shareholding in this company, that would value the company at around £600 million, but Irish Life have reserves of £500 million or more. They have 40 per cent. of the Irish insurance market and one of the biggest property portfolios in these islands. They have substantial institutional shareholdings in a large variety of major enterprises, including the two largest banks. How can a company with that list of assets be worth no more than £600 million? Why are we not being told the truth on this issue?

That is only one of the principles involved in this debate. The central issue is the privatisation of the assets of the people and their sell-off to private investors. It is worth recalling a speech made by the then Leader of the Opposition, Deputy Haughey, during the AIB-ICI affair when he said that his aim was to protect the interests of the taxpayers and ensure that the taxpayers were not compelled directly or indirectly to assume responsibility and to pay the bill for something which was not of their making and for which they had no responsibility. He said that if a mistake is made involving major losses then those losses could and should be borne by the private financial sector and not by the taxpayer. It would be an absurdity, he said, an unacceptable injustice and totally ridiculous if the general public, the great majority of whom have never benefited one iota from banking profits, were asked to step in and take up an additional burden because of someone else's mistakes. Deputy Haughey said the taxpayer had no responsibility for the matter and would not have benefited one whit if the acquisition of ICI by AIB had proved a complete commercial and profitable success. In such circumstances, he said, nobody would have come here with a piece of legislation seeking to provide that those profits would be applied to the benefit of the Irish taxpayer or the Exchequer.

Deputy Haughey's concern then was to ensure that the taxpayer did not suffer as a result of grievous banking mistakes but where is his concern now? Why is he not moving now to protect the taxpayer and to ensure that the taxpayers' interests in Irish Life are fully protected? Why is the Taoiseach allowing a position to be connived at where Irish Life will be sold off to the highest bidder, in all probability for significantly less than its true value? Can this really be the same Taoiseach whose photograph appears in full colour at the beginning of a document called National Recovery — The Next Phase, the manifesto on which Fianna Fáil fought the last election? Page 28 of that document deals with commercial State enterprise, in bold type it states and I quote:

Fianna Fáil will encourage the development and expansion of State companies, if necessary in joint ventures, so as to create wealth and sustain employment. Fianna Fáil remain fully committed to the maintenance of a viable and profitable commercial semi-State sector, in providing vital services. The strategic value these companies can assume has been underlined by recent events...

One used to think that Fianna Fáil stood for something, and if nothing else, they stood for a commitment to the development of Ireland. It is clear now, surely, that Fianna Fáil threw out more than one core value when they entered coalition with the Progressive Democrats.

On the one and only occasion on which the principle of privatisation was discussed in the Chamber in April 1987, the then Minister for Finance, now Commissioner Ray MacSharry, firmly set his face against the concept and dismissed the whole notion as ideologically motivated, and not in the interests of the development of the economy. The motion before the House on that occasion — ironically, a Progressive Democrats Private Members' motion calling for an accelerated programme of privatisation — was soundly defeated. In other words, on the only occasion on which this House has discussed the principle of privatisation, it was rejected.

The whole thrust of the Programme for National Recovery ostensibly, is towards the development of a dynamic contribution from the State sector to job creation and the modernisation of the economy. There is not a word in that programme which could lead anyone to believe that the Government which drew it up had any interest in privatisation. The Fianna Fáil-PD Programme for Government entitled, In the National Interest, not only reaffirmed the Programme for National Recovery but went on to comment on commercial State companies and to say that the parties were, and I quote:

committed to the maintenance of a viable and profitable semi-State sector. Any changes in the ownership structure of particular State companies will only take place if it is in the public interest, and in the best interest of the company and its employees, and following consultation with the Social Partners.

Even then Irish Life was exempted from this promise "as the process was already underway". That process appears to have included the commissioning of a number of reports, none of which has ever been published, not even the terms of reference given to the consultants have ever been published. We do not know the extent to which the consultants ever inquired into the welfare of the company or of its employees; what value they put on public interest, what process of consultation with the social partners they recommended; or any of the other issues which the Government apparently deemed to be important. We may not know, but we can guess just how much priority was accorded to these issues.

The issue of privatisation, which is now being intensely discussed behind many closed doors, is of fundamental importance. It is impossible to make decisions about privatisation without deeply affecting the national interest, and yet a great many of these decisions are going to be made without the slightest involvement of the public at large. There is a number of issues involved in the privatisation debate. It often seems to me that the public good is the last issue on the agenda to be discussed but these issues must be addressed before any rational decisions can be made on the subject and certainly before the public can be assured that their interest is being served by a privatisation programme.

To listen to many of the commentators on this subject, one would almost believe there is no point in raising one's voice about the subject. A culture has been growing up in the financial press and in the pubs frequented by business gurus, to the effect that privatisation is the only sensible way to approach the development of State companies. They proclaim that all right-thinking people will readily agree that it is nonsense for the State to be holding on to valuable assets when they could be offset against the national debt or sold off in order to reduce taxation. What these so-called independent experts never talk about is the large fees to be got for advising and consulting with the State about these matters. Ever since the good people in NCB were paid more than £500,000 to advise the Government to sell Tara Mines to Outokumpu, the fashion for consulting about privatisation has grown. There are huge question marks about the reason that fee was paid in the first place, especially when anyone with eyes to see could have told the Government that once the decision to sell had been made, there was only one company that made any sense as a customer.

Since then there have been consultancy reports on State companies generally, on Irish Life, the Irish Sugar Company, the Great Southern Hotels and Irish Steel — these are the ones we know of. So far as we know, all of those reports would be saying roughly the same things, and there are two reasons for that. First, no consultant worth his salt nowadays will say something that his paymasters do not want to hear; second, all of these reports were prepared from the base of anti-public sector bias.

In the case of Irish Life, as I have said, four options have been recommended, but each one is a different method of privatisation. No serious examination was given to the possibility of developing Irish Life into a strong player on the European insurance scene as a native owned Irish public company. When will these reports be published? When are the policyholders in Irish Life, the workers in Irish Steel or the farmers who supply the Irish Sugar Company to be consulted about their future or when is the tourist industry generally to be consulted about Great Southern Hotels? When are the people as a whole going to be consulted?

If a consultant prepared a report, for example, for somebody like Dr. Tony O'Reilly and told him that the only sensible way of dealing with his overdraft was to sell off all his most profitable businesses, I doubt very much if the consultant would ever work in Dublin again. That is what we have been told and when I say "we" I mean the Irish people and we are not even being given an opportunity to express our views about all these consultants and their conventional wisdom. The argument is being bolstered, of course, by some public company managers who feel constrained by the influence of Government Departments, and who long for the excitement of the private sector. I have great sympathy for them in his dilemma and would argue strongly that when public sector control becomes public sector interference they have a case. Surely the way to deal with this is hardly to swap the control of a Government Department for the control of a German multinational. If our public sector managers believe they are going to be better off in the private sector, many of them are going to have a rude awakening. Over and above that it was the spirit of public service in our public companies that was one of the main springs of our national economic development in the sixties. We cannot and should not allow that to be frittered away in dreams of private sector glory.

On this subject of national development, there is another side to the argument. How can our national interest be served by selling our insurance companies to the French; our steel industry to the Germans; the flagships of our tourist industry to the English; our sugar industry to the Americans or our aviation industry to the Arabs? Surely the future economic prosperity of this country depends on the development of strong native owned industries. How can we be so blind as to be willing to sell to the highest bidders without any regard for where the future lies?

As I said earlier, there are a great many issues involved in this whole subject but they are being swept under the carpet. The debate is being conducted only among the vested interests and the decisions are being made in secret. The Labour Party fully endorse the call by the Irish Congress of Trade Unions for a White Paper on this subject which would set out all the arguments and not just the self-serving ones. I would go further and assert that the Government who sell off any of these State companies without consulting the people involved will have lost all sight of the need for accountability. Irish State companies are the property of the people of Ireland.

Our past and our future are bound up with those companies and we are entitled to a say in what happens to them. They are not the property of any Minister, consultant or entrepreneur; they are ours, and we demand to know what is going on before any final decisions are made on those issues.

I want to refer to the Bill before us. As I understand it, when the Bill is boiled down to its essentials, privatisation will proceed as follows. Firstly, the present shareholding of the Minister for Finance on behalf of the State will be transferred to a company called Holdco which is being set up for this purpose. Secondly, Holdco, in turn, will set up a subsidiary called Newco which will take on board the trading activities of Irish Life Assurance plc.

Mr. M. Higgins

On a point of order, I hesitate to interrupt my colleague, Deputy Taylor, but I want to ask if the Irish language version of the terms Holdco, Newco, etc., referred to in the legislation will be circulated during the afternoon.

Acting Chairman (Mr. Sherlock)

I note the Deputy's point and he will be communicated with in that regard.

Mr. Taylor

Thirdly, by means of ministerial orders, the assurance business of Irish Life Assurance plc will be transferred to Newco and when this has been completed, Irish Life Assurance Company plc will effectively be wound up. Fourthly, the Bill will enable the Minister to dispose of his shares in Holdco whether in whole or in part at a future date, thus effecting the privatisation objective. Finally, there are various provisions in the Bill to safeguard the continuity of employment and conditions in respect of employees transferring from Irish Life Assurance plc to Newco.

There are a number of issues requiring clarification in relation to, for instance, the rights of policyholders and whether they will be adequately rewarded under the restructuring. Clarification on these points will have to wait until the details of the ministerial orders are available. However, there are certain aspects which can be questioned at this time, as follows.

First, approximately 5 per cent of the shares of the present Irish Life Assurance plc are held by private individuals who receive them in consideration of shares held in old insurance companies which were amalgamated to form the Irish Assurance Company in 1938, which was the predecessor of Irish Life. There seems to be no provision in the Bill where such shareholdings could be converted into shares in Holdco. Does the Minister propose, under existing legislation, to buy out such shareholders prior to the establishment of Holdco? If so, the basis of valuation of such shares has to be clarified and there will be a cost to the State becoming the 100 per cent shareholder effectively in Irish Life Assurance plc.

Second, if these private shareholders are not being bought out prior to the establishment of Holdco, there appears to be a most unusual situation in prospect where a company, Irish Life Assurance plc, will have 95 per cent of the shares held by a holding company, the balance by private shareholders and the subsequent liquidation of Irish Life Assurance plc will leave such shareholders, including Holdco, entitled to a cash residue for distribution by the liquidator on the winding-up. That seems to be an extraordinary way to proceed.

Third, apart from their life assurance business Irish Life have various other activities, for example, Irish Estates, which is a subsidiary company owning and letting apartments. They have a controlling interest in Maguire and Gatchell Builders Providers, which may well have been liquidated but which had property interests close to the city centre. Furthermore, there is the shareholding in Church and General Insurance. It will have to be clearly established what subsidiary interests were in the beneficial ownership of Irish Life and not the policy-holders via, say, their life funds, as presumably interests controlled by life funds will be treated as the property of the policyholders and will form part of the transfer of the assurance business to Newco.

Fourth, because of the substantial costs involved, relief is being accorded on the transfers of property from Irish Life to Newco. It could be argued that there will be a substantial loss of revenue to the State by virtue of such relief being granted and that there are many companies in the private sector which could benefit substantially from a reorganisation in line with modern management structures but are precluded from doing so because of onerous stamp duties which would arise on the transfer of property. Indeed, it could be argued that part of the proceeds of privatisation could be derived by virtue of such stamp duties which the Minister proposes to waive under the Bill.

Fifth, there is a specific provision in the Bill for an assurance company to hold shares in their own holding company, with such shares held as assets of their life assurance fund. There is the usual stipulation that the shares must be traded on a recognised stock exchange. There is an overall limitation of 10 per cent on the amount of shares in the holding company which can be so held. However, there does not seem to be anything to prevent the new Irish Life, as an investment manager of a pension fund which is the property of the members-beneficiaries of such a fund, from investing in the shares of Holdco in the same way as the existing Irish Life Assurance plc are significant shareholders in various quoted public companies at present.

Therefore, in essence, there could be a way around the 10 per cent ceiling and effectively the new Irish Life Assurance Company plc could control substantially more than 10 per cent of Holdco. Would this defeat the object of privatisation or could it be a means of maintaining the value of Holdco shares? While section 9 (2) seems to provide for an overriding control by the Minister for Industry and Commerce, this could not in practice extend to shares which were held on behalf of the pension funds managed by Irish Life which were not part of their life assurance fund.

I want to refer to the meat of the privatisation proposal. The relevant aspects will be the various ministerial orders giving effect to the transfer from the present Irish Life Assurance plc to Newco and the method where the valuation of shares is established and how the policyholders' interests are being protected. For all these reasons we, in this House, are being asked to buy a pig in a poke where this Bill is concerned. Leaving aside the issues of principle involved, there is no way this Bill should be allowed to pass into law until all those issues are cleared up to the full satisfaction of this House.

The late Frank Cluskey once said that a tree can be pruned for growth or it can be pruned for destruction. In the last few years there has been extensive pruning of our State companies, in many cases forcing them into new eras of competitiveness and efficiency.

The result of that operation has been two sided. Many of the public companies are now much stronger and more efficient than they were ten years ago. From a position where they were a drain on the resources of the Exchequer many of them are making a significant contribution now. However, the process has been very painful not only for the people working in those companies but also in many cases for the communities in which they were operating. The B & I, Irish Sugar, Irish Shipping, Aer Lingus, RTE, Bord na Móna, the ESB and others, have all seen upheaval and dramatic change in the past ten years, some of it for the better but some of it for the worse. What a shock for those companies to now discover that Fianna Fáil do not want them to be strong. The more successful they become the more likely they are now to be penalised. Aer Lingus have lost key routes in order to provide a commercial life-line for a small private airline and we have all witnessed the disgraceful treatment meted out to RTE in order to secure commercial advantage for Fianna Fáil associates.

Now, Irish Life, one of the most successful companies of all, are to be offered up on the altar of speculation. Surely, there is justification for a great deal of cynicism among the people about all this. The taxpayers already contribute more than £1 billion every year to the private sector in tax breaks and other incentives. They already watch while more than £2 billion is drained out of the country each year by the multinationals private sector. They have seen 15,000 jobs disappear in the public sector under Fianna Fáil and a dramatic reduction in the quality of life of many of our citizens as a result. On top of all that the Government they elected are embarking on a programme of privatisation aimed at stripping the country of some of its greatest assets with no assurance that those assets will not be passed into foreign ownership. The question they must ask is, who owns Ireland? The answer has to be that every day Fianna Fáil remain in office fewer of our people have a stake in their own country. That is the path Fianna Fáil, the sometime Republicans, and the Progressive Democrats, who were founded to stand by the Republic, are bringing us to.

I should like to refer to the golden share issue mentioned by Deputy Noonan. That Deputy was puzzled why a five year limitation period was introduced into the issue this morning by the Minister who said it was expected that the arrangements would continue in place for at least five years after flotation. The reason is that at the very least there is a very serious question as to the legality under EC law of the golden share retention. We must face the fact that there is a strong probability that Irish Life, after the manipulations by the Government and the Minister, will pass entirely out of Irish control, notwithstanding the Minister's golden share.

The Minister has to face up to EC law on this issue. We know from experience that he often treats EC law or rulings of the European Court with gay abandon. He tells us that he will consider the rulings rather than comply with them but, at the end of the day, it was the decision of the people to join the EC and the Minister knows as well as we do that we are bound by its laws.

The issue of the golden share in privatised companies was examined in Europe. In one case in Britain, that of Rolls Royce, permission was given to retain the golden share but that exceptional position arose only because of the security interest involved in the case of a defence contract, namely Rolls Royce. That was the only reason the golden share provision was validated by the EC. Those I have consulted about this issue maintain that the golden share provision runs counter to the general trust of EC competition policy. It is almost certain that at the end of the day Irish Life will disappear as an Irish company. If the Minister is concerned to retain Irish control of Irish Life he has a simple way to do that. It is not a complicated matter and he does not have to devise a golden share scheme which is dubious under EC law. The Minister could retain at least 51 per cent control of Irish Life for the people of Ireland in his name. That is all he need do if he wants to retain control of that company.

The Labour Party are opposed to selling even one share of the people's holding in Irish Life but if the Minister wants to joint venture with the private sector he can do so by retaining a 51 per cent control of the company. In that event he would not have to worry about golden shares or any artificial arrangement which is of doubtful legal validity under EC competition law. That is not what the Minister is doing in the Bill. He is selling off the birth right of the Irish people on spurious grounds and the arguments put forward by him today do not hold water under any analysis.

The idea that the present structure of ownership of 90 per cent by the people of Ireland inhibits the growth of the company is on any examination of the company arrant nonsense. The company have grown magnificently in their 50 years' existence. Where has the constraint been in that regard? The company could continue to grow at a greater level with the new opportunities in Europe. I am sure the Irish people would be proud to own a magnificent commercial insurance and property holding company that can expand here, in Britain and, after 1992, in Europe. Deputies should not forget that after 1992 European insurance companies will come to Ireland. Some come here by the back door and they will expand their operations after 1992. Those companies will make inroads into the Irish insurance and commercial scenes. We need the strongest possible companies to resist that threat and to hold our own. We need Irish companies to provide employment and give our people the standard of living they are entitled to. Instead, we are letting foreign companies have Irish Life. I have no doubt that foreign companies will be jumping in to get their hands on shares in that company.

Deputy Noonan asked the Minister what type of structure will be introduced and how it will work out. What nonsense, what rubbish. The Minister, according to a speech he made as reported in The Irish Times of 13 March 1990, said that the intention was to sell the remaining shareholding in Irish Life in separate chunks. It was a very good phrase, and I forecast that those chunks will be very tasty morsels indeed for those who have the political clout to get their hands on them. Who is interested in knowing whether 10 per cent will go to Japan, 20 per cent to Paris or Zurich or 15 per cent to Washington? This company, owned by the Irish people, are doing well and have magnificent prospects. They are making profits and if the Minister wants to tap into them there is nothing to stop him. He can send his nominee to the annual general meeting and declare a dividend if he wants ongoing funds from the profits. In the past, Ministers for Finance over the decades were well advised not to do that and to allow the profits to build up, with the result that the company is a magnificent resource today. This kind of spurious argument does not hold water.

We were also told that this has to be done because, otherwise, Irish Life could not get into the American market. I will at least say this for the Minister, he dropped that one this morning. On the other hand, it is interesting to note that Deputy Noonan, for some reason best known to himself, in support of the Minister, introduced that argument. However, we know that that argument is totally without foundation as Irish Life already operate in the United States market. There are facilities and arrangements in this regard and Irish Life — more power to them — have done extremely well in a number of investment and insurance operations in the United States.

The Minister said that profits are largely locked into Irish Life and cannot be distributed to shareholders. Why did he make a statement like that in his speech when it does not stand up to any close examination? Profits are not locked into Irish Life and of course they could be distributed to shareholders, namely, himself, and the people of Ireland, through the Exchequer, if a decision was made in that regard. It is true that up to now the dividends declared were small, the reason is that the profits were retained to build up the company but there is nothing to stop larger dividends being declared if that is required. Why put in that kind of spurious statement? It is an attempt to cloud what is really going on, the sell-out for no good, sound commercial reason of this asset of the Irish people.

I also want to turn to this canard that money cannot be raised to expand Irish Life to enable them to go into bigger and better ventures unless they are privatised. As I said earlier, the chief executive, Mr. David Kingston, said that they have £500 million in reserves which they do not intend to use for expansion purposes. He said that it would be at least three years before the question of further expansion would arise. If the Minister retains — as he says he will — 34 per cent and the question arises in, say, seven years time in relation to raising additional capital, what will happen? Companies can raise capital in different ways. It could be raised by loan capital without difficulty. Irish Life could raise all the capital they wanted for expansion either by borrowings or by issuing preference shares or measures of that nature. The Minister will retain 34 per cent and the company may decide that the method of raising capital they will adopt will be by a rights issue which would require capital subscription from the members of the company. In that case, the Minister will still have to take up his rights issue in respect of his 34 per cent holding. No doubt he will do that as it would be a worthwhile commercial objective. The question then arises, if it is worthwhile putting money in in respect of a 34 per cent interest in the company, why is it not also worthwhile doing the same thing in respect of a 51 per cent or a 90 per cent shareholding? These arguments do not hold water from the commercial point of view as they are unconvincing in the extreme. The Minister, Deputy Noonan, the Fine Gael Party and the Progressive Democrats Party should at least come clean regarding their intentions. They should stop pretending that this is being done for commercial purposes because it would be good for Irish Life.

Irish Life could not have done better. They performed magnificently in a position of public ownership. There is something else behind it. It is to get their backers on to the loot, to sell the company at a knock-down price as Mrs. Thatcher did in Britain. The Taoiseach and Fianna Fáil speak deprecatingly about Mrs. Thatcher when it suits them but the measure before the House today is Thatcherism at its worst. It is the idea that there is a capital gain to be made by the State from the sell-off. These smart boys and companies waiting in the wings to get their hands on a chunk of the company know perfectly well what they are putting their money into. If it is not a very good and smart investment they are not interested. If they consider that it is in their economic and profit interest to take their chunks of the company it is certainly worthwhile for the Irish people to use it as it has been used over the last 50 years — to build up valuable assets for the Irish people and to be tapped into by them at the appropriate time. It is a shabby operation and codology to suggest that this measure is required for good commercial purposes. This should be seen by the Irish people for the sham it is. I hope the people will react accordingly at the appropriate time.

Mr. Rabbitte

Essentially, the purpose of the Bill is to enable the privatisation, either in part or in whole, of the uniquely successful Irish Life Assurance plc. From what the Minister said it would appear that we may well be talking about the entire privatisation of this uniquely successful company. He said that the restructuring — the euphemism used throughout — is to reduce the State's holding from 90 per cent to 34 per cent through a sale involving a public flotation of the company's shares. In the same paragraph the Minister conceded that this holding will be maintained, "for the foreseeable future, but it will always be open to the Government to consider the size of their holding from time to time in the interests of the company and the wider public interest generally." I do not think it is possible to signal more clearly than that, that it is this Minister's intention and this Government's intention, as soon as it is considered decent to do so, to let the ownership of Irish Life pass out of the hands of the State acting on behalf of the people of Ireland and, ultimately, the State will be left with a tiny stakeholding, if any.

Privatisation, of course, is more a political question than an economic one. The precedents in Britain show clearly that the winners from privatisation are those who bought the shares at artificially low prices, the management of the newly privatised companies whose salaries increased on average by 78 per cent, financial institutions, professional advisers and the Government. The losers have been the workers in the companies and the general taxpayer and consumer.

Deputy Taylor spoke about the culture of privatisation that has now grown up. It is extraordinary that we have to follow on the end of these trends in Europe and Britain, so many years after there is adequate data available to us to examine. We have to ape Thatcherism at the end of the Thatcher era when it is patently evident to everyone that the experiment has not worked, that it has devastated one part of Britain and sold off the family silver in so many of the fine public enterprises in the UK. The evidence is there and I will come to some of it later.

Nobody can suggest that Irish Life must be privatised in order to improve efficiency. They are an outstandingly successful, well-managed company who hold strategically important stakes in a wide range of Irish companies. The argument really boils down to the raising of money for the State's coffers. In fact, the money raised from the sale of Irish Life shares would make very little impact on the State's finances. A great deal of misleading comment has been made on this point. The very people who were responsible for the extent of the crippling burden of national debt repayments are the people who are now arguing that we sell off the family silver in order to make an impact on those repayments. The impact is minuscule. One such comment from a Mr. Gerry Moloney of Allied Irish Securities——

An Leas-Cheann Comhairle

A spokesperson for the company. We normally do not name people who are not present.

Mr. Rabbitte

A spokesperson for Allied Irish Securities, in this instance a generic term is adequate because they all represent the same interests. A spokesperson for Allied Irish Securities commented: "Various figures have been quoted but the £250 million cash injection sems to be a not unreasonable ballpark estimate. This is the equivalent of over 10 per cent of all income tax paid in this country last year". The purpose of that was to imply that the sale of Irish Life would somehow allow the Government to cut taxes by 10 per cent. That is a manifest nonsense and untruth. The £250 million, if we take that figure, would be a once-off injection of funds arising only in the one year, saving the Government probably about £20 million in interest repayments on the national debt.

Irish Life control between 10 per cent. and 15 per cent of the shares in many of the major companies traded on the Dublin Stock Exchange. More Irish companies will be subject to unwelcome takeover bids after 1992; the Minister has conceded as much. Irish Life's position as a substantial shareholder in such companies as the two major banks could be of even greater significance in the future. Irish Life has had a criticial role in deciding takeover battles in the past. The Irish-owned Roadstone Limited, for example, fought off British Ready Mix for control of Cement Limited and more recently they were centrally positioned to influence the outcome in the case of Irish Distillers.

In other ways the privatisation of Irish Life would have a detrimental impact on the Irish economy. The capacity required to purchase shares in Irish Life will reduce the funds available for other uses. In Britain the £5.5 billion sterling offered for the Trustee Savings Bank shares was accompanied by a drop of £800 million sterling in building society deposits. Similarly, a flotation of Irish Life shares is likely to be accompanied by withdrawals from unit-linked funds and building societies and it would leave less money in the market for investment in other Irish companies.

As recently as 1980 the then managing director of Irish Life. R. P. Willis, stated explicitly, and I quote: "If we didn't have a sense of being Irish and if we had total freedom we would move more money out of Ireland". The privatisation of Irish Life would inevitably mean that some of their shares would be bought by foreign companies and financial institutions and they would eventually be taken over if they were successful or, alternatively, if they were viewed as under-performing and therefore a good buy. The statement of the chief executive, Mr. David Kingston, that it "should be possible to safeguard the essentially Irish nature of Irish Life" after privatisation is no more than a mere aspiration. Privatisation has generally meant in the medium term that there are job losses. The newly independent management under intense pressure to perform in the newly privatised company, will want increased profits at all costs. It is generally not achieved by increasing revenue but by cutting costs and, in particular, labour costs. The most effective way of achieving this goal is by job losses.

The Minister for Finance has claimed in various interviews and inspired leaks that one need not worry about the Irish people through the State having and retaining a major shareholding in Irish Life through this arrangement that he has suggested of retaining a golden share. Indeed, quite recently in the House in answer to a parliamentary question from myself and at direct meetings with representatives of the ICTU and the MSF, the main union concerned in the company, the Minister reiterated his confidence that the golden share arrangements would be sufficient to guarantee the retention of that significant stake in Irish Life, and it would limit the size of individual private shareholdings after flotation and, therefore, safeguard against takeover attempts.

Debate adjourned.

Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.