Amendment No. 1 in the name of Deputy Pat Rabbitte is out of order because it is equivalent to a direct negative of the section. The Deputy understands he may address himself to that which he wishes to see in it when we come to discuss the section and can, understandably, vote against the section if he is so disposed.
Estimates, 1990 (Resumed). - Insurance Bill, 1990: Committee Stage.
Section 1 agreed to.
SECTION 2.
I accept that, but let me make two brief points in explaining the reason it was put down. It is important that I make them at this juncture.
Let us keep everything in order. Presently, the Deputy will be called on an amendment in the name of Deputy Garland. He would then be in perfect order if he wanted to make a comment. He can speak on one of the future amendments or, as he would wish, in respect of his disappointment that his amendment is not there if he wants to make a comment now, please do.
Let me make this point, which is not relevant to Deputy Garland's amendment. In relation to what is tantamount to the biggest privatisation the State has ever engaged in, I regret that we are being forced on this the last day of the session to rush through a measure which will have major consequences for the economic life of the State. I do not believe it has been adequately discussed but has been overshadowed by other measures, important in themselves, which have recently been piloted through the House. The largest life assurance company in the State, which has the potential to contribute to economic expansion within Ireland as opposed to outside Ireland, is effectively being privatised. This will ultimately mean that it will pass out of Irish ownership, which is likely to have consequences for its tremendous capacity and potential to be utilised in the interests of economic expansion.
I move amendment No. 2:
In page 2, after line 30, to insert the following paragraph: "(c) to direct the Original Company to invest up to 30 per cent of its investments in ethical or green funds.".
It is accepted that this country accepts the ideology and ethics, if any, of the large national and multinational corporations. It should be realised that these corporations operate within the constraints imposed by the Companies Acts. I remind the House that under the provisions of these Acts these corporations must maximise their profits in the interests of shareholders. They are not permitted under the law to take any ethical, environmental or humanitarian factors into consideration. If they deviate from these provisions the directors can be as they have been, sued by shareholders. It is in this alien climate that Irish Life operate in the interests of policy holders and the owner of virtually all the issued capital, the State.
It is interesting to note that the main United Kingdom fund, the Friends Provident Green Fund, has been a great success, even in the narrow financial sense. However, a stop must be put to the unrestrained gallop of these corporations. It is now generally acknowledged that the international arms trade actively promote trouble throughout the world. Indeed, these gangsters were partly responsible for the two major wars this century. In relation to boycotts and ethical investment, great success has been achieved. For example, Barclays Bank were forced to pull out of South Africa. Following the exertion of economic pressure, particularly in the United Kingdom, they decided that it was in their best interests to pull out of South Africa. Many US companies have also succumbed to pressure and have pulled out of South Africa in their own narrow interests.
I hope Irish Life will remain in the ownership of the Minister for Finance, but if the Bill is not amended it probably will be privatised. It is very important that this company remain in State ownership as this would allow the Minister to direct the directors to channel at least part of their funds in a direction which most people in this House would accept would be for the betterment of all. I commend the amendment to the House and ask all parties in the House to support it.
I support the thrust of the amendment but I am not so sure whether we should stipulate a figure of 30 per cent. On Second Stage the Minister boasted that the Government have never intervened in the affairs of Irish Life to direct its investment policy, even though they hold 90.25 per cent of the shares. I query this because, as I see it, given that the Government are the major shareholder in such a major investment vehicle, there is little point in being proud of the fact that they have exercised no view as to how it might best be used in expanding the economy. For this reason I believe Deputy Garland's amendment raises an important question. If there is a particular project which the Government consider to have potential to create jobs or generate wealth in the economy, why should the Government not intervene to try to persuade the fund managers to channel investment in that direction?
I cannot see any reason for a majority stake to be vested in the Government if they are to be entirely passive on this question. In the past the Government may have intervened where takeover bids for other major companies were at issue, but that is a different matter from taking a active position in terms of channelling investment into productive purposes here in the Irish economy. I do not greatly disagree either with some of the remarks that Deputy Garland has made concerning some of the investment decisions of some of the multinational companies, but probably it is not immediately relevant to Irish Life.
I am opposing this amendment because it is basically a matter for Irish Life Assurance Company to determine their own investment policy. The funds we are talking about here are not shareholders' funds from investments, they are the funds of policyholders. It is up to the company to invest policyholders' funds to the best advantage. The company have a responsibility to their policyholders in this respect and to act in their best interests. I do not believe the Minister should dictate the policy no matter how desirable the motives may be; and indeed, successive Governments down through the years have abided by that.
I am sure the Deputy is aware that Irish Life have supported many worthy causes with a social aspect to them — for example, person of the year awards, art awards, the Viking adventure trail and many others. Indeed, the company have also a range of ethical funds which can be invested, so it is not that the company are not doing their bit. Thirty per cent would be totally unrealistic, as it is policyholders' funds we are talking about. If the Deputy wants to get further details I have no doubt the company would be only too glad to supply them to him as well as their whole range or ethical funds. Consequently, I will be opposing the amendment.
Mr. Noonan
(Limerick East): This is a very interesting amendment and I congratulate Deputy Garland for putting it on the Order Paper. It gives us the opportunity to debate a matter which is not usually debated in the House, that is, the appropriateness of investment policy and the responsibility of programme managers and those who direct them when they place investments. We know Deputy Garland's perspective on these matters, but I do not think that a company which is 90 per cent owned by the Irish Government should invest, for example, in the international armaments industry. I do not believe they are investing in the international armaments industry. A company that is owned 90 per cent by the Irish Government should not invest in dirty industry which would be injurious to the Irish environment. I do not think Irish Life are doing that either. It is still opportune to make the point and to do so, by way of amendment.
Irish Life do a very good job for the policyholders and do a very good job in the national interest. I do not have their portfolio of investments to hand, but I think they own something like 10 per cent of AIB, a big chunk of the Bank of Ireland and a chunk of Smurfit and down along the whole equity market. I understand their investments portfolio is available and there is no secret about it. They have always acted in a very reputable way and I could not identify any equity which they hold — speaking from memory — which would not fall within the intent of the amendment which Deputy Garland has put down.
I still think it was a good idea to put it down as it raises a wider issue. In the wider issue there is a conflict between the attitude of the Minister and the attitude of Deputy Rabbitte. It would be a very serious mistake if the State ever became involved in directing a company such as Irish Life as to where they should invest. That expertise is not available to politicians, it is not available in Cabinet and in most instances when it was tried it ended up in tears. There should be an arms length arrangement between commercial State bodies, the Government and the Houses of the Oireachtas and the professionals should be allowed to get on with the job under the normal commercial rules. Any suggestion that there should be a change would be injurious to the company and to the national interest.
Of all the State companies, Irish Life was the one that was never interfered with by any Government since it was established in the late thirties. It was always run on commercial lines, largely in the interest of the policyholders, although in the early years the interest of the shareholders was obviously relevant as well. They have done a very good job and have built a very successful company. I do not think Parliament or the Cabinet should second guess, on the basis of very little information, the professional investment decisions of a company such as Irish Life.
One would have thought that the mainstream parties — I do not mean that in any offensive way — had established that criterion of behaviour in their relationship with the State companies. Something very serious has happened in recent months which is running counter to that. That is that Cablelink was offered for public tender internationally when Radio Telefís Éireann were instructed to sell. When the tenders were in and when a multinational company had decided to pay a very extensive amount of money — on an earnings ratio a multiple of 30 was used — approximately £46 million or £47 million, they were told that there was a change of mind by the Minister and that what was offered for public international tender was no longer available. Bord Telecom were instructed to buy Cablelink at the price which was offered by the international company. The international company were very interested in providing cable television, but they were far more interested in having cable links through Dublin city which would enable them at some future date to compete with Telecom in the provision of telephone services, telex services, fax services. Effectively, the Minister instructed Telecom — probably on the suggestion of Telecom — to take out a potential competitor. They are paying a sum in the region of £46 million for the company. The company earns approximately £1.5 million.
Last week we were setting up the National Treasury Management Agency to look after the liabilities of the State and we said it would cost between 8 per cent and 10 per cent to service what we borrow. The Irish taxpayer, through Telecom, is incurring an annual liability of £4.6 million — 10 per cent of £46 million — to service a debt on a company, the earnings of which will be less than £1.5 million. That makes no commercial sense and it runs absolutely counter to what the Minister has stated here in the Dáil. Some Deputies here may say that is a correct way to behave and that the Minister should intervene, but I do not think it is. What is worse — I think I will attract the interest of Deputy Taylor and Deputy Rabbitte — is that I think it was done deliberately so that when it comes around to the point when Telecom are being privatised and when shares in Telecom are being floated there will be no competitor in place in Dublin. They are keeping up the potential value of the shares by taking out a potential competitor by a direct intervention by a Cabinet Minister in the running of a commercial organisation.
If the position had been that we wanted Cablelink in Dublin to be hived off from the State sector and to be sold, then it should have been open to whoever wanted to buy it. Now we have transferred it from one State company to the other at a cost of £46 million or £47 million and of £4.5 million to the Irish taxpayer. That is the craziest arrangement I have ever heard and it runs absolutely counter to the principles outlined by the Minister here today when he said, quite rightly, that it is matter for Irish Life to decide their investment portfolio and that the State should not intervene in these decisions. Perhaps he would have a chat with the Minister for Communications and ascertain whether the same rules would apply in the manner in which he relates to the State companies who report to him because certainly what has happened in the case of Cablelink is, for many reasons, an absolute disgrace.
We have been straying somewhat into the realm of the Minister for Communications, Cablelink and so on on Deputy Garland's amendment No. 2. I very much sympathise with the intent behind the amendment. It is a pity the Deputy has not been able to narrow it somewhat, making it more definitive in some way. I do not quite know what is an "ethical fund". I suppose it is open to various interpretations. For example, what the Minister might regard as an ethical fund I might regard as a very unethical fund; it is very much a matter of opinion.
Nonetheless, as I understand it, there are certain types of actual investment which could be regarded as very sound investment that would come within the description of "green funds" that would have regard to controlled and sound development of the environment and so on. No doubt there are investments that fall into that category. I would imagine that Deputy Garland's intention was that some proportion of State or semi-State funds could very properly be invested on behalf of policyholders and investors in funds that would fall within that description. There might be a reluctance on the part of some fund managers to do so; they might feel they would do considerably better in other types of investment. They may be right but nonetheless, the idea that some proportion of semi-State funds could be nudged or directed into the area of investments that would, on the one hand, be an improvement and beneficial to the environment generally and, on the other hand, produce some modest profit or whatever for policyholders whose interest must be safeguarded as well has some merit. Those type of criteria could very well mean that.
Encouragement to companies such as Irish Life — which are of a semi-State nature, or at least will have been until this Bill will have been passed — to make such investment could be beneficial all round. To that extent I sympathise with the intent of the amendment.
I want to respond to a couple of things Deputy Noonan said. Deputy Noonan put on his best First Communion face and told the House that not only should the State never direct or intervene in investment decisions of State companies but that it has never done so. Of course, that is not the case. Deputy Noonan's Coalition Government must recall their share of responsibility for the disaster that befell one of our most successful State companies, Irish Shipping, when decisions — for example, as to where, the Irish Spruce, I think it was, should be built as compared to where it should not be built.
(Limerick East): That decision was not taken by our Government.
For example, the accumulated deficit in B & I, to a very large extent was contributed to by Government intervention to cause vessels for the B & I to be constructed at the Verolme dockyard when they might very well have been constructed more cheaply elsewhere. To follow the logic of my argument, then, I should end up supporting Deputy Noonan's contention that the Government should keep themselves to themselves and not intervene. The record will show that what I said was that I did not agree with the Minister's boast that the Government should never intervene in Irish Life; that I believe there could be specific projects in respect of which the Government should intervene — and I think what I said was — to persuade the fund managers of Irish Life that investment in a domestic productive project could be more worthwhile than an investment abroad. I continue to hold that point of view. Indeed, Deputy Garland's amendment raises that question.
I cannot see any merit in boasting of washing one's hands of a no intervention policy in all circumstances. I just do not believe that there is merit in that in a small economy, in which there is a major company such as this that take investment decisions, contributing to economic growth, at home and elsewhere. I cannot understand why the Government should not intervene if they think the company have a project worthy of it.
I do not want to follow Deputy Noonan down the memory path of what happened in the case of Cablelink. I might just remind the House that I got thrown out of the House on that point, not because I am opposed to the Government decision to cause Telecom Éireann to acquire Cablelink — which would be in the national and strategic interests and would make good sense — but, of course, what I believe is that it is preparatory only to introducing a similar Bill before the House for the Telecom/Cablelink corporation as we are now discussing in respect of Irish Life. I am very sorry that the Minister for Finance is so influenced by the temporary little wing of this Government.
I thank Deputies Rabbitte and Taylor for their support at least for the principle of what I am endeavouring to achieve here.
With regard to the Minister's response I appreciate that at least he has given it a little thought. I would not like people to get hung up on the 30 per cent stipulated in my amendment — should it be 20 per cent, 40 per cent or whatever? It is the principle I am endeavouring to establish here.
Deputy Noonan dealt with my amendment in a very fair manner from his ideological perspective which would be different from mine. He says I have not had an opportunity of examining Irish Life's portfolio that may or may not contain funds or investment in international armaments. I certainly hope it does not and I am pleased to note that that is Deputy Noonan's hope also. But it has to be said that, whatever is or is not in Irish Life funds as present, could be different tomorrow. At present Irish Life have complete discretion in where they invest their money. Therefore, it is facile to say: all right, perhaps their present investments are all right — perhaps they are not — but, even if they are, it is facile to say that everything will be all right, that they will never deviate from them. That would be a quite incorrect assumption. I would ask the Minister to re-examine this matter on Report Stage. It may be that the wording of my amendment would not withstand legal scrutiny; I am not a legal expert; it may be that it would require to be changed.
I have given serious consideration to Deputy Garland's amendment. Nonetheless, the principle still stands, that Government should not get involved in attempting — that is as strong as I will put it — to direct Irish Life in how they should invest policyholders' funds, because I must emphasise that we are dealing with policyholders' funds. If Deputy Garland examines the portfolio of Irish Life — like Deputy Noonan — I am sure he will find he will be quite satisfied with their spread of investment. I can tell Deputy Garland that, apart from the areas I have mentioned already, Irish Life have invested in forestry here. As new ventures and industries crop up, involved in the environment, its protection — such as recycling of waste and such matters — just as they have invested in a broad spread of equities in our economy, if they felt in their commercial judgment such was a commercial proposition, I have no doubt they would so invest. We should all be well satisfied with the way Irish Life have run their business — efficiently, commercially correct and have done the very best for their policyholders. That is the business they are in notwithstanding the fact that they have also diverted funds in many areas in respect of which they did not need to be nudged by anybody. Over the years their management have shown that they have been prepared to divert into areas such as investment in ethical funds although, as Deputy Taylor rightly said, we might all differ on the interpretation of such ethical funds. Nonetheless, they have been to the forefront in many areas in which we would all like to see them involved.
In relation to the broader question raised by Deputies Noonan and Rabbitte about how the Government treat the requirements and the futures of various State companies, I want to repeat the Fianna Fáil policy which has always been one of pragmatism and realism. We look at each company and each area on its own individual merits. It is not a black and white situation, and I would not like Deputy Rabbitte to go away from here thinking it was, as far as the Minister for Finance or the Government are concerned. We look at each one on its own individual merits. The record of the past has shown that. We are not going to rehash history here as to which investment went wrong.
State companies are now in much better shape than they have been for a long time and we aim to keep them that way. In relation to the future requirements for capital to expansions, diversifications or joint ventures, the policy is well known. We would encourage any semi-State body to get involved in joint ventures on a commercial basis. We would encourage any expansion in the area they are in on a commercial basis. We dealt with the issue of each company as it came up whether it was a shipping company or whatever. There one could argue whether the Irish nation, as an island nation should be left in the hands of an outside controlled company or should it not. When Verolme was there, what were the economics of it? Was it better to pay over the odds and have the ship built in Ireland, provide jobs and get the spin-off from it? That was a view we took at the time, and I was Minister for Transport then. Each area demands its own evaluation, its own assessment. That is the way things have been done and that is the way we will continue to do it.
Amendment, by leave, withdrawn.
We move on to amendment No. 3. Amendments Nos. 4 and 5 are alternatives and amendments Nos. 1 and 2 to amendment No. 9 are cognate. Amendments, Nos. 3, 4, 5 and amendments Nos. 1 and 2 to amendment No. 9 will be taken together by agreement. Is that agreed? Agreed.
Before Deputy Taylor moves his amendment, does the fact that we are discussing amendments Nos. 1 and 2 to amendment No. 9 mean that we are discussing amendment No. 9 as well?
Acting Chairman
We are discussing amendments Nos. 3, 4 and 5 and amendments Nos. 1 and 2 to amendment No. 9.
But not No. 9 itself?
We would have to discuss amendment No. 9. How could we discuss amendments to No. 9 if we are not discussing No. 9?
So we are discussing No. 9.
Acting Chairman
This is what we have from the Ceann Comhairle's Office. Amendment No. 9 will be dealt with separately.
How can we discuss an amendment to amendment No. 9 unless we are discussing amendment No. 9 as well? That does not seem possible. Surely it would have to be taken with it to be logical.
Acting Chairman
Amendment No. 9 will be discussed with amendments Nos. 10 and 11.
I move amendment No. 3.
In page 3, lines 1 to 5, to delete subsection (2) and substitute the following:
"(2) The Minister shall hold and retain not less than 51 per cent. of the shares in the Holding Company. As to the Minister's holding vested in him or his nominees in excess of 51 per cent of the total number of shares in the Holding Company, the Minister may hold the same for as long as he thinks fit or may sell, exchange or dispose of the same whether by redemption or otherwise, if he considers it appropriate to do so.".
This goes to the bones of what we are about here this morning in regard to this whole issue. If the Minister wants to restructure Irish Life he can do that in different ways. The road he has chosen to go down in his Bill is to let go of the major interest of the Irish people in this company. I say that the Irish people must retain control of Irish Life and they can do that by retaining 51 per cent of the shares in Irish Life. That would still leave room for a good deal of manipulation as to the remaining 40 per cent or more of shareholding.
Let me say that even this amendment would not be my first choice. My first choice, if I had the choice, would be not that the Minister would de-nationalise Irish Life but that he would have taken steps to acquire the outstanding 10 per cent, 5 per cent of which is in private funds and 5 per cent in pension funds. My second choice would have been to leave the shareholding position in Irish Life stand as it was with the Minister, in the name of the Irish people, holding 90 per cent. My amendment here which would permit the reduction of the State's shareholding down to 51 per cent is a third choice, but it would certainly be better than what we are faced with as a result of this Bill. Fifty one per cent would mean retaining the control of Irish Life in the hands of the Irish people which is a very worth while and, in my view, ethical objective.
Let us get down to the nitty gritty of all this. What is going on here? I have read the Minister's speech many times. Why is the Minister seeking the permission of the Dáil to divest himself of the State's holding, the ownership of the Irish people, in this very fine company? When one sets about a major step like this in the commercial world there has to be a good reason for it. What is the reason? That does not appear clearly anywhere.
The Minister said earlier that one has to be pragmatic and that Fianna Fáil were pragmatic about these things. If this was a case of a company that was doing badly, that was losing money and not well representing the interest of its owners, the Irish people, one could say that it was a drain on public funds, a drain on the taxpayers' resources and that we could not allow it to continue. If that was the position one could see some argument for doing what is being done. Is that the case with Irish Life? Is it losing money hand over fist? Is it not growing; is it not doing well? The truth of the matter, as we know, and as the Minister concedes, is that it is doing brilliantly. It is one of the most successful companies in the country. Over the last 50 years it has notched up achievements in the commercial field second to none. In the name of the Irish citizens and Irish taxpayers it has done us proud and we must salute the directors, the board, the workers and all the people that have been associated with it, on a magnificent achievement. If one looks, for example, at the annual report for 1988, which is the most recent one I could get my hands on, they say, and I think it is a fair assessment of their position:
Irish Life has made substantial and sustained progress in its 50 years of existence. Funds managed have grown from IR£.3 million to almost IR£4 billion. The Company is financially strong with reserves of almost IR£400 million.
It is considerably more now. Dividends have been paid to shareholders in every one of the last 35 years and a progressive dividend policy has been followed. Irish Life are well placed to pursue further their objectives. That is not a bad record. They have plenty of funds in reserve, they have increased their managed funds from £0.3 million to £4 billion and they are providing secure guaranteed employment. What is wrong with that?
The Minister, in his Second Stage speech, moaned about dividends. He said the State is not doing well on the dividend issue. As in any business — and nobody knows this better than the Minister — when one owns a company that is doing very well and making good profits, there are two things one can do with the profits, one can plough them back into the business to build it up further — that is done in a lot of cases — or one can take out whatever proportion one wishes in the form of dividend. The owners of the company decide on what the policy is to be — in this case, the Minister in the name of the people of Ireland. It would be open to the Minister to send his nominees to the annual general meeting and to put down a resolution that the dividends should be fixed at £X. That is normal procedure at general meetings of companies. If the Minister felt the policy was wrong and that a higher proportion of the profits should go to the Exchequer in dividends, he could have done that at any time, and he can still do so as long as he retains control of the company. Instead, he complained he was not getting enough in dividends. That argument is a sham and does not make sense.
The Minister said Irish Life must be privatised in order that the company can expand further. As I have said, they have expanded at a massive rate. In 1988 they had £400 million of reserves ready for expansion — the figure is probably higher now. On top of that they can have access to all the capital markets they need if they so wish. The argument was made that if the company are in State ownership they are restricted in the areas in which they can expand, but that is nonsense. The United States was mentioned but we know quite well that Irish Life are already doing very well in the United States. I will quote again from the 1988 report from Irish Life which states that they:
...transacts life and annuity business through Irish Life's wholly-owned subsidiary, Inter-state Assurance Company, based in Des Moines, Iowa. Inter-state is licensed to transact business in 47 American States.
That is not bad. Why does the Minister say he has to privatise the company so that they can expand further in the United States? That makes no sense. The report also states that Irish Life have four operating arms. They say that in Ireland there is a field force of 500 representatives, 14 area offices and ten brokerage offices providing support to over 1,000 independent brokers. In the United Kingdom, Irish Life are transacting individual pensions and life business through a network of 300 appointed representatives. There are 1,000 people exclusively selling Irish Life products, supported by seven area offices located throughout the United Kingdom. The report also states: "In addition to managing the Company's life funds, a range of investment services are provided including segregated fund management". That is not a bad record for a company owned by the Irish people. Should it not make one proud to be an Irish citizen and read that there is a company owned by the Irish State with a record such as that in the United States, the United Kingdom and Ireland itself?
The big issue that comes up now is Europe opening up in 1992. We have to see what competition there will be and what will happen in the Irish field from the point of view of European insurance companies. In this area the name of a major French insurance company has appeared quite a few times. It is called Assurance Generale de France — AGF — France's third largest insurance company. That name has appeared in the Irish context on more than one occasion. For example, they are involved with the Church & General Insurance Co., and already have a connection with Irish Life. It has been mentioned that they are involved in a takeover with ICI. It is quite clear that that company are poised to move into the Irish scene, particularly in the context of 1992. AGF are a very fine company with interests all over the world. They are increasing their profits and are doing brilliantly, but there is one aspect of the company to which many of us here have not adverted to any great extent.
The Minister put forward the argument that to be successful an insurance company would have to be in private hands. That is why he has run so fast to divest the Irish people of their ownership interest in Irish Life. AGF — and this is the interesting point — are 75 per cent owned by the French Government. This insurance company, which are moving in here to take over our Irish insurance interests, with the connivance of this Government, are 75 per cent owned by the French Government. I see no move by the French Government to privatise that company. They are conniving with them, encouraging them and doing everything possible to support them, to boost them, to extend their interests and to build them up in the interests of the French Government and the French people.
Acting Chairman
The Deputy should confine himself to the amendment because he is going into a Second Stage speech. He will have to confine himself to the amendments before the House.
I think your interjection is poorly placed for the reason that you allowed Deputy Noonan, and others, to talk about the investment of green funds, Telecom Éireann and matters involving the Minister for Communications while what I am talking about refers to the core of this Bill, the privatisation of Irish Life. The Minister said it is necessary to privatise this company in order to make them a first class insurance company. I am drawing an analogy between a French State company, who are coming in here to take over Irish insurance interests, a company who are also State-owned. I do not see what could be more relevant to the amendment than that. I intend to go down that road because I am perfectly in order, and I beseech you not to interrupt me when doing so.
Acting Chairman
I hesitate to interrupt the Deputy, but the principle of the Bill was approved by the House on Second Stage. We are on the amendments now and I would appreciate——
My amendment has not been ruled out of order. Is that so?
Acting Chairman
That is correct.
That is what I am talking about. If you understood the point you would realise that what I am talking about is directly related to the amendment before the House, and I am not going to be side-tracked from it. The argument the Government are putting forward is that the company must be in private ownership before they can fully exploit themselves. I was drawing an analogy to show the nonsense of that argument and gave the example of the French state-owned company who are coming in to take the company over, just as so many companies from America, Japan and Europe have taken over so much of our industry. Are we going to let the same happen to the one remaining jewel in the crown, Irish Life? I think this represents a sell out of the interests and assets of the Irish people. It constitutes a sheer sell out to private interests. It should be noted that when the private interests were asked in 1939 to invest in insurance companies that had solvency difficulties, they did not queue up to invest in them. Where were the private enterprise boys and girls in 1939? They shied away from investing in the insurance companies then and it was left to the State, the Irish people and the taxpayers to bail out the insolvent insurance companies and restructure them in what became Irish Life and build up that company. Now that the company have been built up and have reserves of £400-£500 million and a portfolio of management and constitute one of the finest companies on the Irish scene, they, through the agency of this Coalition Government of Fianna Fáil and the Progressive Democrats, come to lay their greasy hands on these valuable assets. They made their preparations for this, and that was not today nor yesterday. There are certain people in Irish Life at managerial level who have been laying the ground work for this. They want to see the company privatised to improve their own personal position. That is what it is all about. They have not considered the interests of the Irish people.
If the Irish people had any say they would tell the Minister that the interests of the Irish people are not served by alterations or variations in Irish Life. They would tell the Minister that Irish Life are doing very nicely, everything is going very well and the company are being built up hand over fist. The reserves are building up and the company are providing employment. They would ask what else does the Minister want and why is he interfering when things are going extremely well? That is what the Irish people would say, in my opinion, if they had the chance to do so.
The nonsensical argument put forward that Irish people should be given the chance to invest in the restructured Irish Life company does not hold water. Why do the Irish people need to invest in Irish Life when they already own the company? You do not have to invest in what you already own. Where is the beef? We come back to the basic argument of what this measure is all about? Why do we have to sell off our controlling interests in Irish Life? Why? Is it to make more profit? No, the company are already making profits. Is it to build up the activities of the business? No, the company are already building up extremely well. Is it to get more reserves for further investment? There is already £400-£500 million in the kitty awaiting investment. Is it to get into the US market? No, because the company are already operating in 47 states. Is it to get into the European market? No, because this will happen in the internal market of 1992. Is it to expand the company's interests in Britain? No, because at present we are doing extremely well in Britain. We must ask why the Minister is bringing us into the House today to put the knife into Irish Life? I cannot adduce any adequate reason. It is a sell off of the interests of the Irish people, nothing more and the intent is to allow capitalists, outside interest, to get their hands on a good thing. They have watched with eagerness and greed the building up of this nationalised Irish company. With the usual envy that applies, they have set their sights on the company and have targeted it with the object of getting their greasy paws on it, and to arrogate the company's profits and potential to themselves.
The Minister tells us rather hopefully that Irish Life will remain an Irish company even after this Government have done their depredations and underhand machinations. I am sure the Minister believes that when he says so but the facts speak otherwise and the clear indicators show otherwise. I have no hesitation in giving my prognostication that in five or ten years time the Irish owned element in Irish Life will be very marginal indeed. I believe the company will be foreign owned. Foreign capital interests from Europe and elsewhere will buy into the company on the stock exchange and the company will be taken over, "golden share" notwithstanding. This brings me to my amendments Nos. 1 and 2 to amendment No. 9 which are relevant at this point. The Minister has told us in his speech that it is his objective to hold 34 per cent of the company and only the remainder will be sold off. What is the point of the Minister saying that when he does not provide for it in the Bill? We are trying to deal with this by way of amendments. Amendment No. 1 to amendment No. 9 provides that the Minister holds 51 per cent of the shares, and if that fails I seek to provide in amendment No. 2 to amendment No. 9 that he retains 34 per cent. I will be interested to hear whether the Minister will accept that amendment. He certainly should accept it because it is what he said he would do in his Second Stage speech and it would be no more than putting into law what he said will be the position and I cannot see why the Minister should object to this amendment. However, it is strange that the Minister did not make such a provision himself in the Bill and he seeks to take to himself power to do whatever he likes with the entirety of his holding in the company. If the Bill is passed without amendment he could sell off his entire holding or any percentage of it, as he so wishes, as he is taking full discretionary and unadulterated powers to himself and we will be forced back into the position of relying on his holding of 34 per cent, which in my view is a disgrace.
In the Minister's amendment No. 9, which I seek to restrict by amendments to his amendment, he is forced to acknowledge that even his holding of 34 per cent is unlikely to be retained because he is providing that when the company would make a rights issue he does not have to take up the rights issue but can sell them off instead and take the money. As we all know, Sir, if that was to happen it would dilute the Minister's holding of 34 per cent, if that was the extent of his holding, below that. If the Minister is making special provision not to have to take up the rights issue, his holding can be diluted immediately and he would hold less than 34 per cent or even 33? per cent, which is a relevant factor in shareholding in certain circumstances. In fact, the holding could go down to 20 per cent or 10 per cent, depending on the size of the rights issue and the increase in shares that took place as a result. They are the reason that I tabled amendments Nos. 1 and 2 to the Minister's amendment No. 9. I am seeking to hold the position under which the State would retain the 51 per cent control, or if that failed, and we are put back to the second line of defence, of the 34 per cent holding, which the Minister himself says he intends to hold that that position should at least be held and not diluted as a result of the sale of his rights issues. If that fails, I have a further amendment, amendment No. 10 which would prohibit the company from making a rights issue.
The "golden share" question comes up as though that will be a realistic factor in retaining the ownership of this company in Irish hands. The EC will have something to say about this proposal which clearly will not hold up in the fullness of time under the EC law and is contrary to the thrust and tenor of EC law. Once the Government open up this position they will not be allowed by the Commission or the European Court to avoid the main thrust of EC policy which is openness of investment. We have been through the history of this to some extent on Second Stage and I do not intend to repeat it. I believe the golden share will not be capable of achieving the objective set out for it by the Minister and will not be successful in the medium-term in holding this company in Irish hands.
This is a most upsetting Bill. It distresses me that we should be contemplating letting go of this company of which we can be so proud. This company is the perfect vehicle through which we could cope with the European open scene after 1992. We need vehicles like this and the tragedy is that we have all too few of them. After 1992 we will be faced with an onslaught by foreign insurance companies, banks and financial institutions to take us over. This is a small nation and our resources are not great in comparison with those of the big nations in the EC, for example, France, Germany and Italy. We need companies like Irish Life to keep our end up. Without companies like this in public ownership with the strength of the State behind them we will be in a very difficult position after 1992. We will become very much the underdogs and we will be taken over economically all along the line by these major heavyweights from Europe.
Fifty one per cent should be the minimum holding of the Irish people in Irish Life. As I said at the outset, this is not my first choice but I am advocating it as a minimalist position. We should retain 51 per cent of the shareholding in Irish Life and if the remainder has to be juggled so be it. The Minister often advocates joint ventures in his pragmatic approach as a member of the Coalition Government. Let it be regarded as a joint venture where 49 per cent of the shareholding can be played with on the Stock Exchange. This means that if the Minister has to get some money in hands for the Exchequer he will have a fair bit to play with.
I put down amendment No. 5 to draw attention to the fact that the Bill does not correspond to the policy stated by the Minister and the Government. The press release which announced that the Minister was floating a portion of Irish Life for public subscription said he would retain 34 per cent of the 90 per cent shareholding he now has and he would dispose of 56 per cent. The Bill before the House does not correspond to that statement of policy. This Bill will allow the Minister to sell off the full shareholding which he has in trust on behalf of the Irish people. I put down amendment No. 5, first, to draw attention to this fact and, second, to show that the Bill goes far beyond the intent of the Minister.
I believe there is some confusion on the Minister's part about his further intentions. It seems the Minister wants to maintain a majority control over Irish Life with his 34 per cent share, taken together with the arrangements which will be made for the company, and will reinforce that by the exercise of the golden share option, which effectively is not a share but rather an arrangement in the articles of the holding company, to prevent other shareholders doing certain things which he thinks would be injurious either to the company or the national interest.
We know that the Irish Life staff pension fund already holds 5 per cent of the minority shares which, together with the Minister's 34 per cent holding, brings the shareholding to 39 per cent. The Minister has made provision in the Bill for the company to take up another 10 per cent of the shares, which will bring it to 49 per cent. The Minister has already given a commitment that arrangements will be made for employees of the company to hold shares in it. I have put down an amendment which proposes that their shareholding should be 10 per cent of anything floated, for example, if the Minister floats 56 per cent of the shares their shareholding should be between 5 per cent and 6 per cent. If it is 5 per cent this will bring the shareholding to 54 per cent.
While there is a statement of intent which suggests that the majority of Irish Life is going to be sold off to public investors, individuals and institutions, and the Bill makes provision for the sale of all Irish Life, this is arranged in such a fashion that the likely combination of the shareholding held by the Minister and the company will be 54 per cent. This indicates a certain lack of clarity on the part of the Minister. When this is taken in parallel with the arrangements in regard to the golden share there seems to be further confusion. If the Minister and the company, acting in consort, own 54 per cent of the company he will not need a golden share. With the golden share arrangement at 15 per cent I do not think he will need it in view of the proposals now before us.
Why is the Minister proposing the second guarantee of the golden share when the combination of shares will be about 54 per cent? I believe that in five or six years time the Minister's 34 per cent shareholding will be well diluted, if not completely gone. There is no great merit in the Minister holding 34 per cent of Irish Life. I think he realises that and is taking power in the Bill to divest himself of his full holding. That is not the policy of the Government as stated by the Minister on behalf of the Government. He should clarify this issue.
I believe the Stock Exchange will require the Minister to make a statement of intent on his 34 per cent holding. If the golden share prevents individuals or institutions from holding more than 15 per cent of the new company it seems the 34 per cent shareholding still in the hands of the Minister will overhang the Stock Exchange in such a manner that the Stock Exchange will be unhappy and will require a statement from the Minister. If a statement is required from the Minister by the authorities of the Stock Exchange I suggest he should make the statement in this House.
Is it the Minister's intention to further dilute his 34 per cent shareholding as the years go by? If this is not his intention why is he taking the power in this Bill to do so? Will the Minister say something different here to what he will say to the Stock Exchange? I do not think the Minister will be able to avoid the issue once the flotation takes place in the first half of next year and he will have to clarify the position in relation to this 34 per cent shareholding to the authorities of the Stock Exchange. Once 56 per cent of the company is floated I cannot see any merit in the Minister holding 34 per cent. I believe the first time there are difficulties some bright spark around the Cabinet table will propose the selling off of another bit of Irish Life at budget time. The calculations will be very easy, shares will be publicly quoted, everybody will know how many shares are vested in the Minister and people will say that if money is needed for something another 10 per cent of the Irish Life should be sold.
Anyone who has been in Government knows the manner in which the Estimates and the budget are prepared. There are always options and politicians — by and large — would like to take soft options; selling off another 14 per cent, 15 per cent or 20 per cent of Irish Life at a future date when there is a shortage of cash in the Exchequer is politically attractive. I have no doubt that the 34 per cent in the hands of the Minister will be quickly diluted and that we will reach a point where the Minister will not hold any shares in Irish Life. If that happens — and I expect it will — the guarantees which the Minister gave to the House will depend on the golden share.
I am still worried about a point I raised on Second Stage. When the Minister stated Government policy in regard to Irish Life he indicated that the golden share mechanism would be used to protect the national interest and that of the company. The commitment seemed to be that the golden share arrangement would be permanently put in place. However, this commitment seems to have been watered down because the golden share arrangement will be maintained for at least five years. The Minister said that by maintaining it for five years he had strengthened the guarantee instead of weakening it but I do not follow his logic.
Deputy Taylor said he expects that Irish Life, under this new arrangement, will be swamped after 1992. It would be swamped if the Minister did not proceed along the present lines. The survival of Irish Life depends on the restructuring of the company and on enabling them to expand by acquisition and by setting up new companies elsewhere, in the United States or France. It is only by being big — and getting bigger — that Irish Life can survive. There have been major constraints on the growth of Irish Life internationally because of the way the capital is structured and it must be restructured to enable Irish Life to grow.
I agree with Deputy Taylor's remarks about the great performance of Irish Life over the years. I also compliment their management, board and employees, long may they prosper. However, the Minister must say precisely what he has in mind in relation to the company. The difficulty about this Bill is that we are only dealing with phase one of a long process which involves court cases in two jurisdictions and an ultimate flotation of the shares. That is not the end of the matter because the Minister has taken power to sell all Irish Life and he is suggesting to the House that the arrangement he is putting in place to protect the national interest, by means of a golden share, will be temporary. It is a great pity that the Minister did not publish a White Paper to clearly explain his intentions and the implications of the different phases before 56 per cent of the company is floated between now and — I suppose — next year.
I should like to comment on the value of the flotation. If we go down this road we should maximise the benefit to the Irish taxpayer and ensure that the greatest return possible should accrue to the Exchequer. I understand that the consultants who advised the Minister told him that if he could sell the company in one unit to a large concern that would be the way to get the biggest return to the Irish Exchequer. It follows that the more the Minister dilutes it the less benefit there will be to the Exchequer. It seems that the golden share option, and the manner in which the Minister had failed to address the 34 per cent issue — even though he has the power to float it but says he will not — are relevant to the price of the shares. The combination of that and the golden share will be relevant to the publicly quoted value of the company and, consequently, to the return to the Exchequer from the flotation.
It also seems that the more restrictive the process is, the less the value of the shares. I should like the Minister to address these issues because by holding 34 per cent and by lining up another 20 per cent in various tranches to be held by the company's pension funds, the company and their employees, the company, in one way or another, will hold a majority. On the other side there is the issue of no shareholder, or combination of shareholders, holding more than 15 per cent. Has the Minister been advised that this will suppress the value of the shares? Will he confirm his advice was that he could maximise the return to the Exchequer by selling the company to one institution? Will he also confirm it follows that the more he dilutes it the less the value is? Will he give the House an indication of his expectations in regard to the value of the company and the options put to him to increase or reduce the value of the company arising from the manner in which he decided to organise the flotation?
In speaking to this group of amendments, I wish to remind the House that I indicated on the Order Paper my opposition to the section because I do not believe that the Minister on Second Stage rebutted the arguments made concerning the necessity to divest himself of the majority of his stakeholding in Irish Life.
I am even more reluctant than Deputy Taylor — who described his amendment as his third choice — because of my views on the calamity this represents for the national interest to be forced into a situation where I have to express a view on the merits of retaining either 51 per cent or 34 per cent in public ownership. The Congress of Trade Unions learned a bitter lesson from their dilution of their principled stand of opposition to our major State commercial companies being privatised. When one gives this Government an inch — and indicates that extra capital may be raised as long as the majority shareholding is retained in State hands — they take a yard. The result is a measure like this which proposes that the State shareholding should be reduced from 90 per cent to 34 per cent.
I disagree with Deputy Noonan because I do not consider there is any confusion about what the Minister is seeking to do here. The Minister, according to Deputy Noonan, would have us believe one of two things, first, that he is reducing the State's shareholding from 90 per cent to 34 per cent — which Deputy Noonan pointed out, quite rightly, is not in the legislation — but the Minister, in fairness, made it quite clear on Second Stage that whereas the optics might be that he is reducing his shareholding to 34 per cent, in reality this is only a temporary little arrangement. The Minister addressed this point on Second Stage and stressed the value of the golden share in retaining the Irish ethos in the company. He makes it very clear that he is doing so and he is putting this special arrangement into the memorandum and articles of association for a period of "at least five years after flotation". He goes on to say that this special or golden share arrangement will reinforce the interest being retained through 34 per cent holding but he goes on to make quite clear that the Government may at any stage in the future further dilute that shareholding. It seems clear that against the background where the company themselves have said they are unlikely to need major access to capital inside four or five years, the Minister is engaging in the cosmetics imposed on him by political considerations to leave the impression that he is retaining 34 per cent stakeholding and control through the use of the golden share mechanism.
Deputy Noonan would have us believe that this is because of confusion or lack of clarity. He points out that the other view is that the Minister will have 34 per cent direct shareholding — amendment No. 9 allows a facility whereby the trading company may now take shares in the parent company — add to that the shareholding by the pension fund or some share option for the staff and you have a position, Deputy Noonan argues, theoretically of retaining State control.
It is only theoretical.
As the Minister had said, it is purely theoretical. Deputy Noonan is making a jesuitical argument because basically he agrees with what the Minister is doing — and has indicated so — to the management of Irish Life who have been campaigning for this on changing ground for some considerable period.
The real reason is that the Minister is bringing both sides of the road with him although, with all due respect to the Leas-Cheann Comhairle, let me say it is an outstanding characteristic of the Fianna Fáil Party down through the years — very successfully deployed, I also concede. The Minister is doing this because he is fully aware that, if he is to continue the cornerstone of this Government's economic policy and secure a new programme for social progress with the ICTU, he cannot come into this House and say "We have decided to sell off Irish Life, to privatise Irish Life". He cannot do that in terms of the unions involved in Irish Life. He cannot do that in terms of the agreement or understanding he has with the MSF, the main union involved in Irish Life. He has given them commitments that not only will he retain a substantial shareholding but through the use of the mechanism of the golden share he is quite satisfied that he will be able to retain control. Therefore, he leaves it open to him to gradually achieve the objective which is to privatise Irish Life, to sell off the State's shareholding in Irish Life and to lead to all the consequences Deputy Taylor has outlined at great length and with which I agree.
It is not acceptable politically, either, in terms of his own backbenchers. The Minister made much play in an earlier riposte of the Fianna Fáil traditional stance on State companies and their commitment to funding many of these State companies and ensuring they are allowed, according to him, to flourish and grow. Therefore, it is not acceptable politically to a great many of the moral community of Fianna Fáil that he should follow the Thatcherite practice of disposing of successful State companies. Have a look at the situation now in Britain once the Thatcher miracle has been exploded. Look at what the succeeding government are going to have to contend with in Britain — part of the country laid barren by the policies of Thatcher and now the cupboard is bare. The great state companies in Britain have been privatised and sold off, and that is the kind of legacy the Minister would seek to impose on the Irish people as well.
As Deputy Taylor asks, what happens when all this is done? Ultimately and inevitably, foreign interests will get a controlling interest in Irish Life. In that situation, whatever concentration in the national interest has been pursued by Irish Life in the past will obviously be diluted. Foreign interests will dictate investment wherever there is the better yield. If that happens to be outside Ireland, like so many other of our leading companies, then that is where the investment decisions will be made.
In his contribution Deputy Taylor asked why the Minister is doing it. He said he has read his speech on several occasions and could not find a satisfactory answer. I think the Minister answers it partially in his Second Stage address where he says that the Government believe that Irish Life — a great many of us would have no difference with this — must develop as an Irish based international financial services company specialising in long-term insurance and savings. He goes on to say that under the present corporate arrangements profits are largely locked in and cannot be distributed to shareholders and that expansion is, therefore, limited by the level of retained profits and reserves. He said that while a capital injection is not an immediate or short-term need, access to capital will be vital in future.
I think the Minister agrees with me that that is the nub of the case. All these other things we have heard about, expansion into the American market and so on, have been so many red herrings dragged across this debate. That is the nub of why the Minister is bringing this legislation before the House and we having to cope with it in the very short time available, without the merit of a White Paper and without the merit of clarity on a good number of the questions that were raised.
Access to capital for expansion is the major issue. The Minister did not tell us that he had the agreement of the unions concerned for the capital restructuring of the company. It was the advocates of privatisation who successfully confused the capital restructuring of Irish Life with the necessity to privatise the shares in Irish Life. They are two separate and distinct issues. The unions share the aspiration to have a strong Irish based international financial services company, but the unions agreed that that could be achieved through capital restructuring other than through privatisation of the shares. The Minister is aware of that as well. The Minister is aware that the paltry dividend for the shareholder from the present corporate arrangement is not the only yardstick of economic contribution. Of course, because of the largely mutual status of the company in the arrangements made in the early seventies, the dividend to the shareholder is paltry, and I accept that; but that is not a fair measure of the economic contribution. The fairer yardstick is the impact that the proper use of their £4.5 billion assets can have for the Irish economy.
As Deputy Taylor said, one could make a decision on whether the payment of the dividend is the priority or whether the reinvestment of that for productive purposes in the Irish economy, in so far as that is consistent with the objectives, is a more valid explanation. We have established that it is for reasons of access to expansion capital that the Minister has been persuaded to accede to the chorus for privatisation. The company cannot currently have a rights issue and so cannot raise necessary capital.
The company have made it clear, and the Minister reiterated this in his Second Stage speech, that there is no immediate or short term need for such a capital injection. Why then are we forced into this? Why is it so important that the pace and rate of international expansion of this company should be dictated to such an extent that privatisation is considered the only feasible alternative? Why is it now a dogma of this Government that in no circumstances should we provide capital for economic expansion? After all, we provide at least £500 million per year to the IDA to attract foreign industry. Why can a share of that capital not be channelled to an Irish owned, uniquely Irish company for purposes of economic expansion in the domestic economy? Why is there a dogmatic resistance to the Government finding capital for seed corn, in the economic sense, in this country? I cannot understand that. I do not accept for that reason that we have been told the whole story. The Minister has not told us anything about the financial institutions who will make a short term killing on this flotation, about the financial advisers who will make a fortune overnight, or if it is his intention to recruit NCB and look after their own, let them handle it for us, thus killing two birds with the one stone. Fianna Fáil believe they are looking after the country and coincidentally looking after their friends. It is another fortuitous coincidence——
You are getting cheap now.
——that the Minister will be looking after the interests of the senior management in Irish Life who have led the chorus and who will double their salaries overnight as well as taking up a cheap share option. The Minister has not told us anything about these side effects but they are very pertinent to the discussion. I do not agree with Minister Daly that I am taking a cheap shot. I look forward to hearing whether it is not the case that in the British experience, and on the assessment and analysis in the May book, for example, of the privatisation of similar English corporations, that a financial killing was made overnight by the senior management and financial institutions who took up a significant portion of the revenues in the process of successfully floating them and in exercising a cheap share option. Of course, the financial advisers who will have to be retained by the company——
They will be retained by tender.
I hope it is not like Tara Mines.
It will be open tender. I said that on Second Stage.
To go through the complex process envisaged in this Bill, including guiding it through the courts here and in Britain, a fortune will be made.
The Minister claims that he can assure control through the mechanism of the golden share being enshrined in the articles and memorandum of the new holding company. I have an amendment which will seek to enshrine this commitment in the Bill. I would refer the Minister to a question that the Leader of The Workers' Party put down in the European Parliament yesterday.
I presume it is on this amendment?
Absolutely.
This deals specifically with shares.
I assure the Chair that the leader of The Workers' Party had this amendment and this Bill only in mind when he put this question down at my request. It relates to the question of the golden share. The question he asked was whether the Commission were aware that the Irish Government were considering a proposal to sell a majority stake of the State-owned Irish Life Assurance Company, while retaining a so called golden share which they claim would allow them to prevent the accumulation of any single shareholding in excess of 15 per cent, with the objective of ensuring that the company would not fall into non-Irish hands and whether the matter had been the subject of any discussion between the Commission and the Irish Government and if the Commission would state whether they would regard the proposed golden share as being in any contravention of Community competition policy, either now or following completion of the single market, and if so what steps they proposed to take on the matter. The answer received is a remarkable tribute to the skill in evasion of the draftpersons who put it together. They showed that when it comes to evasion they are in a league above our own native ability to avoid the question, but it is very telling in these circumstances.
You did not get the answer you wanted; that is what it is.
That is not so. The Minister knows very well that, for example, the main union involved has been seeking recently to get him to deal with this point with precision. The answer to the question received was:
"Golden Shares" have been employed in a number of privatisations in recent years. Although this device may allow national governments to continue exercising some degree of control over the activities and/or the direction of formerly state-owned companies, it does not, on account of this fact alone, infringe Community law, either in respect of competition, or as regards freedom of establishment. Accordingly the matter had not, in the context of the policy areas mentioned, been the subject of discussion between the Commission and the Irish Government.
There are a number of reasons which give major cause for concern arising from that, the biggest one being that the point concerning whether or not this control mechanism is valid after 1992, was entirely evaded. The question is entirely avoided, and I should like to avail of this opportunity to ask the Minister if he can reassure the unions, the staff and the public that after 1992 the mechanism we are talking about will be valid. There are serious reasons to believe that that will not be the case. On Second Stage, I instanced the contribution of the British Minister who opined that it will not be valid.
He should speak for himself.
He may be speaking for himself but European law applies here just as it applies in Britain. If the view is——
It is his view.
——that European law imposes certain obligations on one member state it is logical to presume that it will impose them on a second member state. Unfortunately, the reply only states that it may allow national Governments to exercise some degree of control. It qualifies it further by saying that on account of this fact alone it does not infringe Community law and goes on to say that there were no discussions with the Government in the context of the policy areas mentioned but it did not say that they did not have any discussions with the Government at all.
It is incumbent on the Minister to reassure the people who are concerned about this point. After the completion of the Internal Market, will the mechanism of the golden share give the Minister the measure of control he envisages? Of course, the cat is out of the bag in so much as the Minister has signalled very clearly that it is not his intention necessarily to retain his stake holding at 34 per cent. One of the amendments under discussion, as a fall back, seeks to oblige the Minister to do that but the Minister has made it clear that that is not his intention. That point is relevant in amendments Nos. 1 and 2 to amendment No. 9.
From my vantage point, I see some considerable merit in section 9 which provides, for the first time, for a life assurance company to take a shareholding in the parent company which they are not permitted to do under the law at present. The argument advanced that the company would be put at a competitive disadvantage is obviously valid. If such a company can trade in a range of other equities, why should they not be able to trade in the shares of their own parent company, particularly when competing institutions can? I welcome that but is the position highlighted by amendments Nos. 1 and 2 to amendment No. 9 not that the Minister will inevitably dilute the shareholding of 34 per cent? If the entire purpose of this is to enable a rights issue in order to secure the capital for expansion in the very first rights issue, say on a one to one basis, then the Minister's stake holding will be reduced. Does the Minister not clearly indicate in the Bill that he does not intend to avail of the rights option? If the Minister does not intend to come up with the cash for the rights option then his shareholding is diminished?
I should like to hear the Minister address that point because it seems to me that in the first rights issue on a one to one basis instead of 34 per cent he will end up with 17 per cent. Is the Minister saying that on the first rights issue, and any subsequent rights issues, he will take up the State's option?
I am opposed to the thrust of the Bill because I believe it is unnecessary, against the national interest and is not in the interest of expansion in the domestic economy. Many of the arguments that have been advanced for it have been proved fatuous and irrelevant. We are reduced to the single question of capital for expansion. I do not believe that, in the context of the capital we must advance for an industrialisation programme, we could not advance it in order to facilitate the expansion in accordance with the national interests, not necessarily in accordance with the profit motive of some people who want to expand Irish Life outside the State for purposes that will have very little impact on the domestic economy.
I should like to refer to the point advanced by Deputy Taylor concerning the French company, AGF. It is not merely that the name of AGF is cropping up, as Deputy Taylor put it, around the place; it is no secret in business circles that AGF are going to be the leading contender for as much of a stake holding in Irish Life as they will be permitted to get. AGF are a French State-owned international insurance giant and they are going to seek to assert control over what was previously an Irish State-owned insurance company. It must be one of the final ironies of the debate that the leading contender is a State-owned company of another country and that we are arguing that somehow constraints are imposed on our own State-owned company by virtue of the fact of that company being State-owned. This is the second time within little more than a year that an Irish Government have found it necessary to divest themselves of their stake holding on behalf of the Irish people to a foreign State-owned international company. We have had the experience of it being considered desirable to divest ourselves of our stake holding in Tara Mines to the Finnish State-owned multi-national mining company, Outokumpu, and now we find it necessary to facilitate the expansionary aspirations of a French-owned multi-national insurance company.
Why can we not facilitate the aspirations of Irish Life to become a strong Irish-based international financial company? The Minister has not answered that point and it is for that reason that The Workers' Party have adopted the position that we will not dilute our opposition in principle to what he is seeking to do. I accept that Deputy Taylor's amendment, in seeking to retain 51 per cent of this uniquely successful Irish State company in public ownership, is the next best option. I agree that it is necessary that that should be enshrined in the Bill because, with all due respect to the Minister, I do not believe — I am not going to go into the area of the Minister's intentions or his motivation — that it is practicable to hold out the prospects to the Irish people that he will continue to maintain a substantial shareholding in the company once it is floated and begins the process of having its Irish ownership eroded and international financial companies are provided with the facility of asserting control.
It is shameful there has been so little debate, both inside and outside the House, on what is the most major privatisation embarked upon by a Government, that no White Paper has been issued on the complex issues involved and no argument has been advanced to justify the privatisation of shares other than an ideologically motivated one which does not stand up to scrutiny. Despite what Deputy Noonan may say, that there is confusion in both the legislation and the Minister's mind over the retention of a 34 per cent stake-holding, there is no confusion at all but rather deliberate ambiguity to facilitate the State in divesting itself of its remaining stake holding when it is politically propitious to do so. It is simply not politically propitious to do so at the moment. As I said, not only would it be unacceptable to the moral community of Fianna Fáil, whose grandfathers built up many of the State companies, but also in a climate where the Minister needs the acquiescence of the Irish Congress of Trade Unions for another programme for economic expansion.
Having seduced the Congress into a position where they would be willing to dilute their stance he will say to them "You are taking a very realistic approach. The days of State monopolies are gone. We need new cash which the State cannot come up with, but I will continue to exercise control and retain a substantial stake-holding on the one hand and enshrine in the memorandum and articles of association on the other the golden share option to ensure that no individual will be able to aggregate shares above the level of 15 per cent". Sadly, as Deputy Taylor said, the Minister need not come back to this House after negotiating a new programme for social progress.
He will be able to trade the 34 per cent on the market.
Diarmuid Desmond and the lads will give him advice on how to dispose of the next tranche of shares.
For a very small fee.
Yes, but that is incidental——
Deputy Rabbitte will accept that he has had a fair outing in the matter of imagination, hypotheses, prediction and anticipation together with relevance to the amendments. Perhaps he would now encapsulate all in one last fling at the amendments to the section.
As always, I bow to your wishes. I must say I have received a much fairer outing than the national interest in this debate. If anyone has used their creative imagination it is the Government benches rather than these benches. I am outlining the facts. The option will be there to dispose of the remaining stake-holding in the company. The day will inevitably come when this will be taken up. This is the thin edge of what is a very thick wedge, given that it is proposed to reduce the size of the shareholding from 90 per cent to 34 per cent immediately. The rest will be sold without this House having the opportunity to say yea or nay. This a tragedy. I fail to see why we need to be so subservient to the interests who have campaigned for this.
I ask the Minister to deal in more precise terms with the questions that have been raised by the staff and me concerning the golden share. I have put on the record of the House the question asked by the Leader of The Workers' Party in the European Parliament yesterday and the very unsatisfactory, evasive, confusing and ambiguous response to it which failed to indicate what is likely to happen from 1992 onwards. Would the Minister outline the reason it was necessary for him to bare his breast for the first time and tell us that the special share arrangement will be held by the Minister for Finance to enforce this limitation and that the arrangement will continue in place five years after flotation? I ask the Minister to indicate why the figure five years was chosen. The only possible reason is that once the five years are up this arrangement will be excised from the memorandum and articles of association. For how long after——
I was accused by some of your people of leaving it out altogether.
The Minister made it known that the golden share was there to stay. The MSF suspected that you would do this which has been described by Deputy Noonan as a temporary little arrangement. I presume it will last longer than the other temporary little arrangement cobbled together this time last year, but by how long? Will it still be in place after 1992 and does the reason have anything to do with the statement issued by the management of Irish Life that they will not need any capital for four or five years? Will their request for money to fund expansion happen to coincide with the termination of the golden share? I look forward to hearing the Minister's reply.
I regret to say that this is very shabby legislation. The Minister is being less than honest with the House in two respects. Deputy Rabbitte and all other speakers on this side of the House have made the point that the Minister's statement that he will not dispose of 34 per cent of the shares will not be enshrined in the legislation. There is no need to repeat the arguments made by other speakers on this side of the House on that matter, but I look forward with bated breath to what the Minister has to say in justifying his actions.
The Minister is being less than honest on the question of the golden share which is to remain in place for at least five years. What he is saying in effect is that in six years or five years and one day the reference to the golden share will be removed from the company's memorandum and articles of association when the Minister will be completely free to dispose of the shares with the result that the Government will no longer hold a special position in the company.
Perhaps there is a need to restructure the company but this is not the right way of going about it. Until such time as the people wish to see the industry restructured, be it State owned or privately owned, with a series of worker co-operatives being established — the correct and logical structure for industry in both this or any other country — there should be no move to privatise the company. I submit the people are not ready for such a step, but they will be in time. Until we are ready to go down that road we should do nothing which would make it more difficult to take that step. Accordingly, the best road for this company to take in the future is to become a mutual company, owned and controlled by the policyholders with the staff being adequately protected. I have no doubt the wrong road to take is to privatise the company and dispose of the shares.
While I have no amendment tabled on this matter, I intend opposing the section. Even though Deputy Taylor has said that his own amendments are at best second or third best, I will support them if necessary.
The first question to be nailed down, put to bed and out of the way — it is one that is causing real concern outside, if real concern still exists after Second State — relates to the golden share. I thought Deputy Rabbitte, and others, would accept what I distinctively put on the record in relation to it. I said I was providing for an indefinite duration because I was being accused by people outside that I might make a change next week, next month or next year.
The Minister would never do that.
I will come to the Deputy's question in the European Parliament in a minute. The Deputy does not even believe what he is told in this Parliament; he prefers to go over with facetious questions across the water to try to muddy the waters and, having failed to muddy the waters, to come back to ask us to explain. I will explain the position in a few moments.
There is nothing facetious about our concern. It is a very serious question.
Deputy De Rossa has made his point without interruption and that atmosphere will continue so far as I am concerned. The Minister to continue, without interruption.
The Minister was provoking me, a Leas-Cheann Comhairle.
The golden share is of indefinite duration. I sought to assure Deputies by undertaking that it would not be redeemed in the first five years after the flotation. I was delighted to hear Deputy Rabbitte talk about my powers of seduction and persuasion. I never thought they were as strong as he tried to portray them when he suggested that I was able to seduce the Irish Congress of Trade Unions. The Irish Congress of Trade Unions, like the Government, are looking at every case on its merits and are making up their minds on them. That is what we are doing.
I come now to deal with the question put down in the European Parliament in relation to the golden share. Deputy Rabbitte asked a straightforward question as to whether it will apply after 1992. This is a question which, apparently, his leader failed to have answered in the European Parliament but I do not have any hesitation in answering it in the Irish Parliament. As all EC legislation stands, as all the directives presently stand, there will be no change post 1992. To make a change would require either an amendment to an existing directive, a new directive or new legislation. I have no knowledge of any such proposal in the pipeline, being talked about, discussed or otherwise. We had no discussions with the European Commission on this matter because we did not need to have any. We know what exists in legislation, we know how to interpret it and the Government sought the best legal advice in relation to it. That is the straightforward, unequivocal position, no dancing around the edges as one might suggest they have done in the European Parliament. We will leave that to the Deputy's leader to sort out. I hope that point is crystal clear. The interpretation I took from Deputy Rabbitte's argument, is that I have continually made an argument and won it. To try to bolster up their argument that was clearly lost on Second Stage they went to the European Parliament and came back with information that was not of any benefit to them, good, bad or indifferent.
I will deal with all the questions put to me and the two amendments. I will not go into detail on my own amendments because they refer to a later section, except to say that the interpretation put on them here is not correct. They are purely technical. I will deal with that point at length when I come to it.
I am opposed to the amendments, the first of which would require me to retain a majority shareholding in the company. The Government have decided to reduce their holding below 51 per cent for the reasons I explained in detail on Second Stage. They made this decision after a detailed consultant's report was prepared. They considered the report in depth before arriving at their decision and consulted the company and their staff. The decision is reasonable and balanced and in the best interests of all concerned.
I am also opposed to amendments Nos. 2 and 3 which would require me, in effect, to hold not less than 34 per cent of the shares of the holding company. As I explained on Second Stage I do not see this abridgement of my powers as necessary and it would be an unusual restriction on the Minister's rights as a shareholder in the company. Such a restriction does not exist at present in the case of the State's shareholding in Irish Life itself. It is the firm intention to retain a large shareholding in the restructured company. There are no plans to alter this position. The Government, and future Governments, must retain the discretion to exercise their rights in the public interest in relation to their shareholding in the company.
Some have read into these latter comments that a decision has already been taken to dispose of the remaining 34 per cent, and indeed, throughout this debate today one got that impression. That may not be their intention but for the purpose of debate they have given us to understand that that may be their impression. No such decision has been made nor has it arisen, quite the contrary. It will almost certainly be a requirement of the flotation — Deputy Noonan referred to this issue — that an undertaking will be given that no further shares will be sold for some time after the flotation to avoid a market overhang. I will have no difficulty in giving that commitment at the time.
(Limerick East): How many years?
This is a matter for judgment, as Deputy Noonan will understand, following advice and so on.
It should not be difficult to give us the information now.
The Deputy wants me to give out advice here that is available to me, and to the Government, to aid speculators in relation to what will happen to a flotation. I am not prepared to do that.
The Minister has said he will have to give the guarantee and why not inform the House as to what the terms will be?
I said I would if I was called upon.
The Minister will be called upon to do so.
The Deputy is even surer than I am; I said if I was called upon. It would be inadvisable to require the Minister to seek the approval of the House if he wished to sell further shares in the holding company, for whatever reason, at some time in the future. I believe that in such a case it would be difficult for the Minister to exercise his shareholding rights in a reasonable and effective manner in the public interest at that time.
The amendments to my amendment No. 9 on section 3 seek to restrict my powers in relation to the flotation of the holding company in the same way as those proposed in section 2. I have to say that I am opposed to what Deputy Taylor is proposing. The Government have decided to reduce their holding below 51 per cent and that decision stands. It is intended to keep a large holding, 34 per cent, and for reasons I have already explained I cannot accept that this percentage should be written into legislation. It is my strong view that the discharge of responsibilities as shareholder is best left to the Minister to act in the public interest. The Minister will be answerable to the Houses of the Oireachtas on the discharge of his duty and will have to act in a reasonable and prudent way.
I will now deal with some of the more detailed questions asked by the various contributors. I thank Deputies for contributing to the debate. We had a good debate on Second Stage and the debate which took place today was a good one. Deputy Rabbitte, and others, complained about the lack of public debate on this issue but the Government signalled a couple of years ago that they were seeking advice on the future restructuring of Irish Life. There was plenty of time for public debate and it has been debated to some extent outside. The Deputy may not agree with the conclusions reached outside in relation to it or those reached here. In fact, this House decided on the principles of this Bill on Second Stage by the only democratic means open to us, by voting on it. We are now dealing with the details of the Bill because the House has already decided what the principles should be.
The whole purpose of the Bill is to allow Irish Life to grow and develop as an Irish based international financial institution. The Bill is seeking to secure the future of Irish Life. If they do not get access to capital in the future they will be overtaken by their major competitiors, such as the banks. They must deal with the changes that have taken place in the financial services area, the operation of free capital movement, the freedom to set up in any member state of the Twelve after 1992, freedom to have rights establishment and, indeed, the banking directives. We all know what is happening. We will all be in a free and open market after 1992.
Are The Workers' Party and The Labour Party seriously suggesting to me that Irish Life could be left the way it is to operate within the constraints on the company after 1992 and be as successful as it has been for the last 20 years? I do not accept that and it is unreal to suggest it. It is very easy to come into this House as a member of The Workers' Party and, to a lesser extent, as a member of the Labour Party and say "We think what you are doing is wrong. They do not need capital. They can expand in the future the way they have done in the past"——
We did not say that. We said we were in favour of the capital restructuring but that was not the same thing as privatisation.
——when that is not the position. Where is the capital to come from? The Deputy posed the question but did not answer it. I am asking: where is the capital of the company to come from? As the Deputy knows, the other source is the Government source. If one contends that it should come from the Government source then one is advocating increasing State borrowing and, at the same time increasing taxation to fund that additional borrowing. That is what is involved. That is really what they are saying. One cannot dance around the edges, pose the question and not answer it. I am absolutely certain that Deputy Rabbitte and others are committed to the future development of Irish Life, to the preservation and increase in job opportunities, we all are; but, at the same time, they will not face up to the reality of how best to provide for that future.
The Government have taken their decision. Deputy Noonan advanced the view of his party, but Deputy Rabbitte has dodged the question as to from where future capital will emanate if it is not to be got in this manner. The Deputy has chosen to ignore it. That is his business. If he wants to continue to do so——
I did not ignore it. I have a very clear view of borrowing depending on its purpose. For example, we borrowed to fund the IDA programme of industrialisation.
I know that Deputy Rabbitte wandered into the area of what should be new industrial policy but I am not getting into that area. I am contending that that is a different debate, for a different Minister and a different day.
The Minister is now dancing round the edges.
It is the same issue.
I have views on industrial policy in one area of my responsibilities as Minister. The Deputy has a fair idea of where my views lie in that regard because I have referred to them here before. There was reference to AGF by both The Workers' Party and the Labour Party, by Deputies Rabbitte and Taylor. I did not hear them raise any objections to AGF acquiring the ICI. Were they glad to see them acquire it or were they not? They come into this House and talk about what AGF may have in mind in the future. It is interesting to note that it is a Socialist Government in France which have a large shareholding in this——
That is not the point at all.
The Minister is dancing round the edges.
——but the so-called Socialists in this country seem to take a different view of what will be the score.
(Interruptions.)
Deputy Rabbitte made an uninterrupted contribution.
The Minister is misrepresenting me.
On Committee Stage, when the Minister will have concluded Deputy Rabbitte is entitled to rise again and correct all the omissions or statements of the Minister. I would ask him to be patient and do that. He may not negotiate with the Minister across the floor of the House.
I was merely saying that what is good for the French-owned group is good for the Minister.
The Deputy can say it later on. I will call him when the Minister has concluded. But I do not want any interruption of any speaker addressing the House.
The Minister is being mischievous.
Oh, no, I have no intention, good, bad or indifferent, of commenting on the privatisation policy of another government in another country. All I am pointing out is that this company came in here, took over ICI and I did not hear any outcry on the part of either of the Deputies concerned, or indeed of their parties, in relation to it. They do have a minority shareholding in Church and General. I am sure that the future of ICI is——
Is it all right with the Minister that they took over ICI and that they will take over Irish Life as well?
That is a nonsensical argument in that on the one hand Deputies are not prepared to face up to the reality: that there is a ceiling on any shareholding within this company. Therefore how can they take over a majority shareholding in the company when there are already restrictions on the size of shareholding they can hold? I have already stated the mechanism by which that is done.
The Minister stated that about the 48-hour rule as well and what happened to that?
I must insist that Deputy Rabbitte cease interrupting or he will have to leave the Chamber. Perhaps the Minister might contain his generosity and magnanimity and not encourage interruptions by responding to them. The Minister to continue.
I am merely trying to respond to points raised. If I were to take up the misinterpretations at every turn of my Second Stage introductory remarks and response, we would be here all day responding to what is their interpretation of what I said and my interpretation of what is really there. I will ignore that. I should have thought Deputies would have done the same. But the truth sometimes hurts. It will not be possible for AGF to take over Irish Life because there is a ceiling on the size of any shareholding.
Let me come to the future of Irish Life. Any corporate plan requires a long gestation period. A company must know that it has access to capital. No company will rush into accquisitions, particularly in the insurance or financial field, where large capital is required. Irish Life took three to four years to plan their future corporate strategy. Indeed, if Deputy Taylor looked at their Annual Report 1988 he would have seen quite clearly that the company's corporate objectives were spelled out very clearly, and from which I might quote:
Our objective in Irish Life is to be a major force in selected areas of the financial services business. Our concentration is on catering profitably for longer term financial commitments and transactions, particularly in the areas of life insurance, pensions, savings and investment.
In Ireland, the U.K., the U.S.A. and in new countries, we will expand into areas compatible with our core business where we can achieve significant size in our chosen areas of operation.
Of course the company have to fund their expansion, and have done to date, from internal resources. There is no denying that fact. What I am talking about is what the future holds and from where the capital is supposed to emanate. I have stated what is the Government decision, what are our views, our policy. The parties in Opposition are entitled to hold a different view, different policy approach and to advance them. I am here to carry through Government decisions on the Bill before the House. It is a matter for the company to formulate their future capital needs. Therefore, in floating the company we will be removing a barrier to fulfilling those needs and indeed give Irish Life the same opportunity and access to capital markets and capital instruments as all their competitors. That is what is happening here. It is not fair to the company, and would reflect badly on them, that it is being done for some ulterior motive. Those are the basis commercial reasons for what has to be done in respect of where this company will go in the future.
Deputies spoke about dividends and distribution of dividends. Deputy Taylor suggested that I could send my representatives to an annual general meeting and say "I am not satisfied with the dividend. I want X, Y or Z". That shows a total lack of understanding of the structure of Irish Life and the way their profits are locked in. They are not available for easy distribution of dividends merely by sending people to an annual general meeting. In fact, the maximum available under their present structure was approximately £3 million. I get something in the region of £400,000 in dividends. Nobody could really come into this House and argue successfully that the Irish taxpayer is being well looked after. Certainly, their policyholders are being well looked after, but I do not think anybody could legitimately argue that the taxpayer is being well looked after. Consequently, in this flotation business I hope to do a better deal for taxpayers as well.
Deputy Noonan raised questions about the theoretical position, about my 34 per cent, that a subsidiary company could hold, say, 10 per cent, bringing the figure to 44 per cent, with 5 per cent being held by the pension funds, bringing the figure to 49 per cent and whatever distribution there is eventually among the remaining shareholders. If, as he said, one could theoretically lock them all in together one could hold a majority shareholding. Of course, the reality will be utterly different because, for instance, neither I nor the Government, have any control over the investment of the pension funds. One might well pose the question: do they want to continue to hold 5 per cent? Perhaps they will decide to buy more or decide to have less. That is a matter for the management of the pension fund of Irish Life. I do not have any say in the matter. We cannot presuppose that this or that will happen in the future.
Would a 10 per cent subsidiary have funding rights under company law? If they do, would they have voting rights or would they be non-voting?
They would not, they would be non-voting. Even on the pension funds there are rights. I do not know what they might do in the future. I have already explained clearly to the House that the golden share will work. It is not incompatible with the EC.
As to the advice of advisers about whether, if it was sold in one big block, one would get more money for it, I do not need commercial advisers outside to tell me that if one is selling all the shares in a block to some huge institution the likelihood is one would get more money. The terms of reference given to the advisers was to look at the future of Irish Life, to look at the options which are available for the expansion and development of Irish Life, and give a range of options to the Government. They did that. Obviously the fewer shares sold the less one gets out of it at the end of the day. I indicated that one option was to sell off in one block, but this did not appeal to the Government. The option recommended by the consultants allowed for the impact of the value and the need to retain a substantial holding. I do not believe that the retention of the golden share will lessen the attractiveness of the company. It is a well known type of instrument used in flotations. It will certainly give the Exchequer a much better yield than it is getting at the moment and that is looking after the interests of the taxpayer.
In section 3 there is a power to renounce the rights to sell the 56 per cent by this route if needs be. It does not mean that the Government will dilute or sell the 34 per cent. I will come to it in more detail when we come to that section.
I spelled out what the real purpose of the Bill was in relation to the future of Irish Life. The priority expressed by the trade unions in meetings with me was employment. They have got their comfort on employment. On the development of future job opportunities, which is what we are talking about here, I have said what the Government decided about what we believe is for the best development of Irish Life in the future. Others have sought to say this is not the way to do it and that they would prefer the Government to hold the whole 100 per cent, but have not addressed the real problem as to where the capital would come from. It is an historical accident that this is a State-owned company in the first place. The State put no money into it; the State do not guarantee any money in it; the State never interfered with it. It is through good commercial management down through the years that they have done a good job and we want to see it as an Irish based international financial services company that can hold its own with the best in the free market from 1992 onwards.
I would like to thank the Minister for his very full reply. Certainly he has dealt with the issues which I have raised in a very frank manner. There are assurances on the record of the House now which will be of benefit both to the company and to the employees and anyone who seeks to invest in the company subsequently. That is a very praiseworthy approach.
Again, I would repeat that I am sorry the Minister is only now so forthcoming with the information and that he did not take the opportunity in advance of the legislation to publish a White Paper that addressed these issues and contained the commitments which he is now giving piecemeal to the House. That would have been a much more satisfactory arrangement. In so far as the Minister has replied fully to the amendment I have down on section 2, and has satisfied me on the points I have raised I would like with the permission of the House to withdraw amendment No. 5 when we come to it.
It is a nice happy position for Deputy Noonan to be able to say that he is satisfied with the Minister's response. I am afraid I cannot say the same. I am not happy with the Minister's response. I am not satisfied that it meets the needs of the situation at all.
We have had discussions about this golden share company and the extent to which it may or may not be effective in protecting this company from being taken over by outside interests. The Minister said on Second Stage that the golden share will be in position for at least five years. That is a carefully thought out, reasoned statement. It did not fly in out of the clouds. If what the Minister is telling us now was the position, instead of saying that the golden share would be in position for at least five years, he would have said the golden share will be permanently in position, that this would be a permanent arrangement so far as this company is concerned. It would have been quite easy to say that if that was the case, but the Minister chose not to say that. I believe the reason he put in the phrase as carefully as he did is that he knows that there is a very serious question mark over his ability to maintain that position in the EC context. I believe he knows that very well.
When they set about trying to take over Irish Life in its new position, as they will in the fullness of time, these substantial outside interests will avail of every facility at their disposal to enable them to do that, the Commission, the European Court and so on. There will be a fair amount of legal operations going on there. It may be that the Minister thinks he does not have to accept rulings of the European Court. He seems to think he can do that in regard to the 48 rule and maybe he intends to act similarly here, I do not know. I think a very correct and fair analysis of the golden share position was given in an article in the Business and Finance section of The Irish Times on 14 March this year in a report from Seán Flynn in Strasbourg where he says:
The Government's decision to retain its so called "golden share" in the restructuring of Irish Life may contravene the spirit of EC competition policy, Commission officials said yesterday.
In explaining the decision to retain a 34 per cent in the company the Minister for Finance said that this was intended primarily to ensure that the company remained under Irish control. Commission officials said yesterday that this attitude appeared to undermine the Commission's intention to ensure that companies of all member states enjoy access to other Community business in the Single Market.
Privately, senior Irish officials also concede that the legality of the golden shareholding could be challenged by another Community assurance company in the EC Court of Justice.
They can well concede it. It most certainly will be challenged I would imagine.
One official said that, while the exact legal position was unclear, the decision could be interpreted as running counter to the general thrust of EC competition policy....
Golden shareholdings have been retained for a limited period——
Hence the Minister's five year talk
——in other British privatisations — in order to allow companies adjust to the private sector and to help ward off initial hostile takeover bids——
Press comment does not concern me.
The word "initial" is the key word there.
——British officials said yesterday that they believe that the practice is permissible in the short term——
The Minister says five years, which may be stretching short term a bit. That is where the five years comes from.
No.
If the Minister was going to keep it permanent he could have said so. He did not say so. We have the meaning. We see clearly enough what is going on here. The Minister reads out the prognosis from the Irish Life booklet. On page 10 they say:
We re now working through our detailed strategy for the next three years in each operating arm and these plans will form the basis of our continuing development.
We are now working through our opportunities with development potential, both within and outside of our existing areas. At this early stage, it is sufficient to comment that we have identified a number of exciting possibilities. These are at an early stage of investigation. I look forward to reporting upon these as they come to fruition.
There is nothing in the report which says the company are hamstrung as a result of their inability to gain access to the funds they need for these expansions. It is quite clear they have adequate funds available for anything that is in the pipeline.
The Minister asked where would the funds come from if massive amounts were needed? I will answer that question in a moment, but what is the basis for the Minister even positing that question? The company have made clear that is not the kind of operation they favour. Mr. Kingston, the chief executive is quoted in The Irish Times of 13 March of this year, in an article which states:
"We don't like major acquisitions", he stated last night and made it clear that Irish Life sees itself growing through the acquisition of small assurance groups and then "moulding them to our own image." Irish Life has already used this policy when it took over Inter State Assurance in Iowa and turned the group around from lossmaker to profit-generator within a two-year period. Last year, Inter State boosted its premium income sales by 20 per cent to over $40 million and the aim is to double income in 1990.
As can be seen, the chief executive indicated that this massive acquisition policy is not the policy of Irish Life. Quite clearly, there are adequate funds available for the type of operation they envisage and for which they plan.
The Minister asked me and Deputy Rabbitte where the money would come from if these big operations were undertaken, and I will tell him. Firstly, there are reserves of over £500 million available for investment, as the chief executive has said. That is not bad to start with. Secondly, there are investment funds in the region of £4 billion. There is nothing to stop the company from raising loan capital. A company with those reserves and those prospects can raise loan capital not for revenue purposes but for capital investment purposes. They can raise all the capital they want. The European Investment Bank and the financial institutions are looking for a good operation to which they can lend money. As the prospects and the propositions exist for Irish Life, they would have no trouble raising whatever capital they need. The company have resources and will have continuing resources over the years from their build-up of profits which are ploughed back into the company.
Finally, if all else fails, Irish Life could consider some worth-while investment that would produce employment and boost the economy. Why does the Minister recoil in horror from the idea that the State would be part and parcel of such an investment? We are not talking about give-aways. There have been give-aways over the years to private enterprise, running to billions of pounds. If there are prospects of Irish Life acquiring a company, would that be so terrible? Would it be so dreadful that the Irish people over the years, as well as their children and grandchildren, should reap the benefits in dividends and profits from such a wisely-made investment. I do not think that is such a dreadful concept.
If the State simply retained its investment in Irish Life, over the years profits would be building up and dividends increasing. There would be something that all of us, our children and our grandchildren, could be proud of. If we sell it off, there would be a once-off payment and that is all. Having sold out for a relative pittance, we would then look back in time to come and see private enterprise, perhaps foreign-owned, doing very well out of it. We would then regret that we did not keep the company when they were doing well. We would wonder what motivated us to let it go for a relative pittance. The AGF and companies from Germany, Italy and so on would be making profits from the company which could have been pumping money into the Exchequer year in and year out. There will be very great regret, when we look back at the so-called republican ethos of Fianna Fáil and the Progressive Democrats, that this company who were doing well and cost them nothing were let go from the grip of the Irish people. There have been no calls to pump money into this company. They are doing extremely well but the Government are not prepared to leave them alone and get on with their business.
This is a good viable business which is doing well. It is not the kind of business one sells off. Is that the way people operate in the business communtiy. Do they take the best and sell it off so that somebody else should have the benefit of it? If we have something that is growing and improving, surely we should keep it. If we make £500,000 this year, we may make £1 million next year and so on. The ethos of this Government is that we must get rid of that. They are selling the asset of the Irish people which has been built up with such dedication over the last 50 years.
My colleague, Deputy Michael D. Higgins, when talking about this matter on Second Stage in his very expert way, described this as a robbery from the Irish people, and I agree with him. The Minister said there is some capital gain to be made from selling this company. If something is worth £100 and you sell it for £100, that is not a capital gain. You are just selling something for what it is worth. If you have something that is worth £100 and you sell it for £200, you are doing well, but if, as is much more likely to happen here, you have something that is worth £100 and you sell it to some millionaires for £80, £60 or £50, there is no capital gain. That is a giveaway, and that is what I believe we are involved in here.
On the face of it, the Minister's commitment on the record concerning the golden share may appear adequate. This is crucial to the argument being put forward because the fact that he has resorted to the use of the golden share mechanism means he acknowledges the importance of maintaining control and direction of this company in Irish hands. That is the only reason it is there. There are very serious questions that still remain to be answered, because I find it very difficult to reconcile the Minister's commitment that the golden share is "of indefinite duration" with his statement in the text of his script on Second Stage "that it shall remain in force for at least five years after flotation". As I said in my original intervention, and as Deputy Taylor has reinforced, that statement was not put in the Minister's speech by the tooth fairy. There was a very considered and calculated reason for saying that it is for a period of "at least five years after flotation" on Second Stage. Whereas the Minister's commitment that it is now for a period of indefinite duration may appear adequate, there is a number of reasons to be concerned about it. First the Minister says he is giving me that assurance in the Irish Parliament and that the Leader of The Workers' Party could not get it in the European Parliament, but that is precisely the reason I am so concerned about it. It is the European Parliament and European law that will determine whether the golden share is open to challenge. I am afraid the European Commission is not going to be greatly influenced by what the Minister for Finance said in the Irish Parliament. If the European Parliament are equivocating as they showed in their evasive response to the question stitched into the record earlier, then I am not reassured by the Minister. Deputy Taylor expanded on this point by referring to an article in The Irish Times on 14 March 1990 where he pointed out:
Privately, senior Irish officials also concede that the legality of the golden shareholding could be challenged by another Community assurance company in the EC Court of Justice.
We all know that sometimes there is a gulf between what all of us say publicly and what we say privately. Are we to believe that senior officials concerned with this flotation are privately conceding that it may be challenged in the European Court of Justice? That is very worrying, because we know the track record of this Government on assurances of what can be challenged in the European Court of Justice. During the formulation of the budget the Government gave a clear assurance to this House that the 48 hour rule was quite legitimate, but we know what happened to that: it was challenged in the European Court of Justice and we know the outcome.
The Deputy is becoming very pro-European.
The European thing was your idea, Minister.
I know that down in Clarecastle they ponder on little else but the European idea.
You are well informed on Clarecastle.
Adopting some of the Fianna Fáil pragmatism, I acknowledge that I am now one of the still young Europeans.
Fortunately they do not have a Workers' Party representative in Clare-castle.
The point I made here is not being rebutted by the Minister's reply.
I am not at all reassured by the Minister's response on this critical area. If the officials handling this matter are privately conceding that it is open to challenge, then I fear for the future of this major company being retained under Irish control.
I am not going to repeat the argument adduced by Deputy Taylor concerning his response, which also stands for me, to the Minister's query about where the capital will come from if we do not go for privatisation. I think the point has been adequately dealt with and the Minister's fear of borrowing in any set of circumstances, no matter for what productive purposes is laughable, coming from a Government who borrowed and put us in the mess we are in in order to eliminate car tax and win an election. I am not greatly impressed by that argument either.
I do not want to allow the record to stand that distorts the point being made about the interest of AGF in the future of Irish Life. The point that was being made is that it is an irony that we are divesting ourselves of State control of a major insurance company in order to hand it over to a French State owned insurance company. If it is good for the French State owned goose why is it not good for the Irish State owned gander? This campaign started with a flurry that there were unreasonable constraints being put on Irish Life by virtue of the fact that they were a State controlled company, now we find that one of the most successful companies interested in Irish Life shares are in fact a State owned French company. That is the point that was being made. It gives the lie to the fact that by virtue of the fact that Irish Life are State owned they are somehow constrained. How come that State ownership does not constrain their French counterpart?
I never thought I would see the day when Fianna Fáil would agree to sell off the family silver. If you were to ask me at the birth of the Coalition partner, the Progressive Democrats, what was the difference between them and Fianna Fáil, when their friends in the media were trying to write them up as the radical party because they were in favour of contraception and opposed to hare coursing, I would have said that their outstanding characteristic was their lust for privatisation. Now it is quite clear they have won over the major party in Government to that view and the tail is wagging the dog. It is a bad day for the Irish taxpayer and it is ironic that the Minister should claim that because of the dividend restriction under the present corporate structure of the company the taxpayer will get a better deal. It is a very narrow view of the interests of the taxpayer. We all know that the dividend that is capable of being paid under the present structure is minimal and virtually non-existent by comparison to what might be paid, but that is scarcely a yardstick of the benefit derived by the Irish taxpayer from prudent use of the investment and asset potential of the company. It is a very narrow deal indeed to suggest that selling off control of this major company to foreign interests is somehow a better deal for the taxpayer.
Finally, may I ask the Minister to answer a specific question concerning the reserved funds of around £500 million? Will the Minister assure the House that the arrangement envisaged in the Bill for reserved funds will in fact transpire? In other words, can the policyholders assert a right to these reserved funds? Who owns the reserved funds of Irish Life Assurance PLC and who will own the reserved funds of Irish Life PLC——
After the court case.
——when the court case has been held. Is it not correct to anticipate that policyholders will assert a right to these funds?
Nothing I have heard since the Minister replied to the Deputy's amendment would substantially alter the reply he gave. I also dealt with the issues raised by Deputies Taylor and Rabbitte on Second Stage.
Any challenge against the golden share in a Community context would have to be taken on legal grounds. The legal advice we have received is that there would be no grounds for such a challenge. I do not want to go into this issue in any greater detail because it was fully discussed on Second Stage and the Minister dealt very adequately with it in his reply to the amendments put down by the Deputies. I thank Deputy Noonan for withdrawing his amendment. I have nothing to add to the assurances which have been given by the Minister.
With regard to the specific point raised by Deputy Rabbitte, I have asked my officials to check the exact details of this as I would not like to give the Deputy wrong information at this stage of the debate. I will be able to give the Deputy the relevant information during the remaining stages of the debate.
Question, "That the words proposed to be deleted stand" put.
The Committee divided: Tá, 69; Níl, 24.
Tá
- Ahern, Bertie.
- Ahern, Dermot.
- Ahern, Michael.
- Aylward, Liam.
- Barrett, Michael.
- Brady, Gerard.
- Connolly, Ger.
- Coughlan, Mary Theresa.
- Cowen, Brian.
- Cullimore, Séamus.
- Daly, Brendan.
- Davern, Noel.
- Dempsey, Noel.
- Dennehy, John.
- de Valera, Síle.
- Ellis, John.
- Fahey, Frank.
- Fahey, Jackie.
- Fitzgerald, Liam Joseph.
- Fitzpatrick, Dermot.
- Flood, Chris.
- Flynn, Pádraig.
- Geoghegan-Quinn, Máire.
- Harney, Mary.
- Haughey, Charles J.
- Hillery, Brian.
- Hilliard, Colm.
- Hyland, Liam.
- Jacob, Joe.
- Kelly, Laurence.
- Kenneally, Brendan.
- Kirk, Séamus.
- Kitt, Tom.
- Lawlor, Liam.
- Leonard, Jimmy.
- Brady, Vincent.
- Brennan, Mattie.
- Burke, Raphael P.
- Calleary, Seán.
- Callely, Ivor.
- Clohessy, Peadar.
- Leydon, Terry.
- Lyons, Denis.
- Martin, Micheál.
- McDaid, Jim.
- McEllistrim, Tom.
- Morley, P.J.
- Nolan, M.J.
- Noonan, Michael J. (Limerick West).
- O'Dea, Willie.
- O'Donoghue, John.
- O'Hanlon, Rory.
- O'Keeffe, Ned.
- O'Kennedy, Michael.
- O'Malley, Desmond J.
- O'Toole, Martin Joe.
- Power, Seán.
- Quill, Máirín.
- Reynolds, Albert.
- Roche, Dick.
- Smith, Michael.
- Stafford, John.
- Treacy, Noel.
- Tunney, Jim.
- Wallace, Dan.
- Wallace, Mary.
- Walsh, Joe.
- Woods, Michael.
- Wyse, Pearse.
Níl
- Bell, Michael.
- Byrne, Eric.
- De Rossa, Proinsias.
- Ferris, Michael.
- Foxe, Tom.
- Garland, Roger.
- Gilmore, Eamon.
- Higgins, Michael D.
- Howlin, Brendan.
- Kavanagh, Liam.
- Kemmy, Jim.
- McCartan, Pat.
- Mac Giolla, Tomás.
- Moynihan, Michael.
- O'Shea, Brian.
- O'Sullivan, Gerry.
- O'Sullivan, Toddy.
- Pattison, Séamus.
- Rabbitte, Pat.
- Ryan, Seán.
- Sherlock, Joe.
- Spring, Dick.
- Stagg, Emmet.
- Taylor, Mervyn.
Tellers: Tá, Deputies V. Brady and Clohessy; Níl, Deputies Howlin and O'Shea.
Question declared carried.
Amendment declared lost.
Since amendment No. 3 has been negatived, amendment No. 5 fails.
Amendments Nos. 4 and 5 not moved.
We now proceed to deal with amendment No. 6 in the name of Deputy Noonan (Limerick East). I request the Deputy's approval to take this amendment and an alternative — amendment No. 17 in the name of Deputy Rabbitte — together. There will be a separate decision in regard to each amendment, if required. Is that agreed? Agreed.
I move amendment No. 6:
In page 3, between lines 5 and 6, to insert the following subsection:
"(3) Any scheme introduced by the Minister, the purpose of which is to offer shares in the Holding Company for sale to the public, shall contain a provision to offer, at a preferential price, to employees of the new company at least 10 per cent. of the shares offered for sale at that time.".
In the course of the Minister's Second Stage speech he said it was envisaged that when there was a flotation in early 1991 provision would be made to enable employees of Irish Life to acquire shares in the holding company.
The purpose of this amendment is to enshrine in the legislation, in specific terms, their right to do so and to outline the conditions under which shares will be made available. It is a very good idea that employees of companies should be allowed to participate in the shares of the company and, consequently, in the profits. However, the practice is more honoured in the breach than in the observance; and, even though certain budgetary proposals were brought before this House in 1982 to enable workers to buy shares in their companies, they have ignored this to a very large degree. The latest figure suggests that about 60 or 62 companies have schemes which allow employees to purchase shares and, consequently, to share in the profits.
On the wider issue, the Minister expressed the view in this House, and outside it, that it would be desirable in the national interest to renegotiate another arrangement with the trade union movement. In any future national wage agreement, whatever euphemistic title is put on it, provision should be made so that employees in profitable companies can share in the profits either through a profitsharing scheme or by holding shares. I raised that with the Taoiseach in the House by way of parliamentary question and he said he would investigate the matter. I raised it also with the Irish trade union movement and I am glad to see that now it has become trade union policy as we go towards the negotiations of the next agreement. Demands are now made by senior officials in the ICTU that this should be part of the process in negotiations in the autumn.
Consequently, it seems appropriate that at the time of flotation shares should be offered to the employees of Irish Life. It seems doubly appropriate, as there seems to be a general move in this direction, that the opportunity should be taken at flotation to ensure that Irish Life employees are given shares at preferential rates and are able to avail of the tax efficient provisions introduced by Deputy John Bruton when he was Minister for Finance so they can share in the profitability of the company.
We have talked about the shareholder, effectively the State. We have talked about those possessing with profits policies, but the people who really made Irish Life the fine company they are today are the management and workers of Irish Life. They should share in the prosperity of the company they helped to create. My amendment suggests that they will get 10 per cent of the flotation, not 10 per cent of the whole company. The Minister says he is floating 56 per cent and I am saying that an appropriate share for the employees is 5.6 per cent. I have drafted my amendment to allow that the Minister might not float the 56 per cent together and might do it by some instalment method. Therefore, if 30 per cent is floated in the first instance the employees' tranche should be 3 per cent. If, on the other hand, it is all floated together, it should be 5.6 per cent. If in years to come the Minister, or his successor, decides to float part of the 34 per cent which is being held, provision should be made for the employees of the company at that point and that should be enshrined in legislation.
The formula I am suggesting is simple enough. First, the employees of Irish Life should have a statutory right to acquire shares in the holding company at any point when such shares are floated. Second, it should be enshrined in legislation that they have a right to be offered, and take up, 10 per cent of the amount of shares floated at the time. Then, I am suggesting, they should get the shares at a preferential rate. I am not attempting in the amendment to define in exact terms what the preferential rate should be.
I would like the Minister to accept this amendment. If there are any technical flaws in the drafting of the amendment I have no objection to his officials rewriting it and reintroducing it on Report Stage. I ask him to accept what I am saying because I think he intends doing something along these lines anyway. The main features of the proposal should be enshrined in statute rather than implemented by way of promise by the Minister in subsequent negotiations. Also, since it is the first flotation, and I believe others will follow regardless of the composition of Governments in future, it is important to enshrine in legislation that the employees of the company have a right in statute to some of the shares floated. It is a simple enough proposition; it is quite clear what I have in mind and I do not think I need extend it further.
Deputy Noonan's amendment is better drafted than mine. My intention in amendment No. 17 was not that 10 per cent of the shares of the holding company should be allocated to be taken up by the staff but that 10 per cent of shares floated would be so available. I can envisage no response from the Minister that would reject amendment No. 6. There is no argument, nor should there be any credible argument, against giving the staff who are responsible for the success of the company a share or an opportunity to share in the success of that company. It is important that that right be enshrined in the legislation. Many vague aspirations to this have been expressed by many companies known to me and companies with whom I have dealt, but achieving it is an entirely different matter. This gives us a unique opportunity to enshrine this in the law and to have that option there in the future when, as Deputy Noonan says and I agree with him, there will inevitably be further shares issued.
Part of the problem concerning this matter in the past has been that workers cannot afford to take up shares. In very many cases where it has been mooted workers are being paid salaries and wages that do not allow them that capacity. I do not think I am expected to explain in great detail why I am in favour of a proposal like this. I think it is evident, but I fear that in allocating 10 per cent of the shares floated one could very well find senior management in a position to generously avail themselves of that allocation and the rank and file staff not being in such a position. It would be very unfortunate if the effect of our amendment was to provide shares at a preferential rate to senior management only or exclusively and the chiefs, who already have other options, availed of this and the Indians could not afford to avail of it. I would like to think, and the unions involved are probably addressing this question, that necessary negotiations will be held with the company to assist the general thrust of the workforce in availing of this option if the Minister decides to enshrine it in the Bill, as I argue he should.
Let me remind the Minister before time expires that his Minister of State gave me an undertaking that he would come back to me on the question of the reserve funds.
I support this amendment for the reasons outlined by Deputy Noonan and Deputy Rabbitte. It is entirely appropriate that the workforce who did so much to build up this company over the years be enabled to participate in and realise some of the profits of the company under public flotation. The details are left to be worked out by the Minister and his staff at a later date. It is a very reasonable amendment and I hope the Minister will accept it.
I would like to add my voice in support of this amendment. For some time I have been advocating a new approach to the manner in which employees in companies are remunerated. We got ourselves into trouble in the past. When companies are going well naturally the employees want a percentage of the profits. To date this has always been by way of increased salaries. That is grand when the company is doing well but when the company is not doing well employees are made redundant, because employment is the first cut that is made. A balance could be achieved between increased wages and participation in the profits by way of bonus schemes or shares in the company. There is no doubt that if somebody has a share in an enterprise its performance means more to him. We have been slow to adopt that type of system. Now that we are selling off part of Irish Life we have an opportunity to lead by example. The Minister may not want to commit himself to 10 per cent, but 10 per cent is reasonable. I would appreciate if the Minister would adopt the principle so that employees can get a share of the company they helped to build. That can do only good for Irish industry. In the longer term this would help employment figures. So often when the cold wind blows the first to suffer are the employees. That is an outdated method of dealing with employees. Redundancies will take place in the future but if we can reduce the potential for redundancies we should do so.
I congratulate my colleague, Deputy Michael Noonan, for tabling this amendment to give us the opportunity to express our views. I am sure the Minister accepts the point he made and I would ask him to accept this amendment. This amendment is perfectly reasonable and I would ask the Minister to accept it.
The question of reserves is part and parcel of this whole agrument. The normal legal position in relation to the reserves of the company will continue to apply. Under the scheme of transfer which has to be approved before the courts these reserves will be allocated between various funds including a special closed fund for "with profits" shareholders and the reserves will remain in the company and will be used to satisfy the prudential and other scheme requirements. It is not possible to be any more specific as this is a matter on which the courts will decide.
Would the shareholders be in for part of the reserves, or are they excluded?
To the best of the information available to me at the moment the shareholder will not. It will be a matter for everybody else except the shareholder.
Presumably the closed fund for policy holders will only be a small portion of the reserves.
That is not an area I will wander into at this stage. This is where the courts will have to come in to arbitrate and adjudicate. I can envisage that some of the reserves would come to shareholders if the courts decided on their distribution, but it is only on distribution that the shareholders would come in. I am not anticipating what the courts will decide.
I presume the scheme of arrangements for the "with profits" policy holders will position them so that they will be better off after the restructuring than before. Is that not the net point.
The safest thing for me to say is that they will not be worse off.
I trust that is a small portion that shall be provided for in the closed fund.
We should come back to amendment No. 6.
I appreciate the principle behind the amendment but it is the detail of the amendment that I have to stand back from. On Second Stage I said I would examine this and I explained today quite clearly that I accept the principle behind the amendment. Shares is a complicated area and I will ask the financial advisers when appointed to consider this aspect of the flotation. It is not necessary or desirable to include these amendments in the legislation or to deal in the legislation with how the flotation will take place. It would be wrong to tie my hands in this matter as it might give rise to practical problems and special pleading at a later date.
Perhaps it would help if I explained the matter further. Employees can either acquire existing shares already held by another shareholder or they can be issued with new shares in the company. Furthermore, employees could acquire shares at the precise time of a flotation or they could acquire them over time following the flotation. In addition to all of this there are different recognised methods under which employees might acquire shares. These include preferential application at the time of flotation; preferential terms at the time of flotation; profit sharing schemes; share purchase schemes; share option schemes or save as you earn schemes.
Deputy Noonan commented that there was of course no point in giving shares to staff unless they are allocated to them in a tax efficient manner. I totally agree with that. If we are talking about giving shares at a discount, the discount becomes taxable. There is no point in defeating the purpose of the exercise by deciding to give shares which would afterwards be taxable. Moreover, all employee share schemes usually conform to Stock Exchange rules and to the guidelines of Irish Association of Investment Managers and the Irish Insurance Federation and other relevant representative bodies. Approval of schemes by the Revenue Commissioners is also conditional on compliance with certain stipulations and overall limits. All of these factors need to be fully taken into account.
The matter is therefore not as simple as it might seem at first glance and hence is not best dealt with by an amendment to this Bill. Let me reiterate, however, that it is my intention to examine this matter in depth bearing in mind what has been said in the House. I accept the principle of the amendment.
There is also the question of the shares in the employees' pension fund. The fund already has 5 per cent of the shares of Irish Life and will after the share exchange with the holding company have 5 per cent of the shares in the holding company. It will be open to the fund also to increase their holding if they wish by subscribing for additional shares and flotation.
With regard to the establishment of profit sharing share ownership schemes, it is also up to the holding company to put such schemes in place and not for me as Minister. There will be no barrier in the articles of association of the holding company to the establishment of profit share schemes if the company so decide. I should like to ask the House to accept my good intentions in this regard having regard to the explanation I have given.
I should like to thank the Minister for his assurances. Is the Minister saying that he agrees in principle with the concept that at the time of flotation shares should be offered to the employees of Irish Life probably at preferential rates, that a lot of detail will need to be worked out and, consequently, he does not want to be tied down by a premature amendment? The Minister said he will ensure that there is nothing in the articles of the holding company that will prevent the holding company and their management from introducing a profit sharing scheme, either through preferential shares or otherwise, as fits the need of the company from time to time. In view of those assurances we are probably looking too far into the future, and in too detailed a fashion, to seek to tie him in the Bill at this stage and I will withdraw the amendment.
I was not asked if I was pressing amendment No. 17, which deals with the same point. The Minister in his reply dealt with the profit sharing aspect of that amendment and I am happy to accept the commitment he gave, with one rider: that I would not like to see whatever allocation of shares is made disposed of in such a fashion that only those on better salaries could afford to take them up.
Amendment, by leave, withdrawn.
I move amendment No. 7:
In page 3, between lines 5 and 6, to insert the following subsection:
"(3) The Minister shall ensure that no individual shareholder acquires a holding in excess of 15 per cent of the total shares in the Holding Company. It shall be unlawful for any individual shareholder to act in concert with any other shareholder in the acquisition of shares. Shareholders acting in concert to acquire shares shall be deprived of all voting rights.".
We are back to the question that we spent some time on — the retention in Irish control of this major company. On Second Stage he acknowledged the importance of Irish Life and the investments they control. He said that it was essential that Irish Life should retain their Irish ethos and their local base. The Minister said that to maintain this ethos and avoid an unwelcome takeover of the company provisions would 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. It appears that we are all agreed on one thing: that control should not pass out of Irish hands. What we are not agreed on is the duration and certainty that attaches to the golden share mechanism to contrive that that is done. Therefore, the purpose of the amendment is to seek to have it enshrined in the Bill to ensure that no individual can acquire more than 15 per cent. It would also implement the Minister's objective outlined on Second Stage.
In response to the Deputy's question about employees I should like to tell him that I included in my acceptance the principle that it apply to all employees of Irish Life. I have no doubt that it is a matter for discussion and negotiation between the unions and the management of Irish Life.
In relation to amendment No. 7, I should like to state that I have had this matter carefuly examined and I am strongly advised that there is no need to include a share restriction in the legislation. This is supported by legal advice. The articles of association of the holding company will provide for a restriction of 15 per cent. I will be able to ensure that the restriction is maintained by using the special or golden share. Limitation will prevent private shareholders, either individually or in concert, from acquiring more than 15 per cent of the total sharecapital. The directors will be required to monitor shareholding and will be given powers to ensure that the 15 per cent limit is enforced. If the 15 per cent limit appears to have been exceeded the directors will be required to enforce the limit by appropriate means, including the disqualification of voting rights. All shareholders will be bound by the limitation and in view of this I do not see the need to include the amendment and, consequently, I am opposing it.
How does the Minister propose to enforce this if a share register shows a company called "AB Nominees Ltd." holding 15 per cent, "CD Nominees Ltd." holding 15 per cent and "XY Nominees Ltd." holding 15 per cent? For all the Minister, the company or the registrar may know they could be in the beneficial ownership of a controlling company from outside the country intent on building up a stake in Irish Life. If the Minister looks at the share register of the company now he will see that it is riddled with nominee companies owning relatively substantial shareholdings. Nobody knows who owns them but we all know that that is how the system works. How does the Minister propose exercising effective control of the real aggregate holding of any group?
The Deputy will appreciate that the articles of association of any company are the rules governing the operation and conduct of the company's affairs. It will be written into the articles of association and, consequently, binding on all shareholders that the directors may at any time ask for, and expect to receive, the full details of the ownership of the shares. They will also be required to monitor those shareholdings and ensure that no 15 per cent is in breach of the provisions of the Bill. If it appears that the provision is being breached the voting rights will be withdrawn from the shareholders. They are the rules governing the holding, operation and conduct of the shareholding in the company. Consequently, everybody will have to abide by them and if they are found to be in breach of them or not disclosing appropriate information the voting rights will be withdrawn by the company.
Deputy Rabbitte's amendment seeks to write into the Bill one of the provisions which the Minister said will attach to the golden share. I do not think the Minister at any stage told us what the full powers of the golden shareholder will be in the articles. He should specify now what other powers will attach to the golden share, apart from the imposition of the 15 per cent ceiling on the tranche of shares that can be held by any individual or company or any group acting in consort.
It is all very well to say that the articles of association of the company will authorise the directors to make inquiries as to who owns any block of shares on the register, but I am sure the Minister is aware that there are many devices under which there are subsidiaries and subsidiaries of subsidiaries under which the true ownership can be kept at a far remove. It is not possible to discover the ownership and one may be told that such a company or such and such a bank holds the shares. It is almost impossible to discover the true beneficial ownership of shares down the line of a listed company if they are sufficiently minded to keep that a secret. There is one basic difference between providing for the restrictions that the Minister described in the articles and what Deputy Rabbitte is seeking to achieve in his amendment. In his amendment Deputy Rabbitte is seeking to make it unlawful to engage in that type of activity. It could be that that sanction might stop a group of companies from getting involved while a mere restriction in the articles, with the only sanction being deprivation of voting rights, would not be anything like as intense a sanction.
It is extremely dangerous to be including too many impositions in relation to the development of Irish Life. This is a relatively small company in European terms. I hope that this will remain an Irish based company having their employees in Ireland, but it is important that the company should avail of every opportunity of linking into other European countries in an effort to get business there. Irish Life will find it virtually impossible to get business in West Germany, France or Belgium if they decide to take that step on their own. The way for them to do so is to seek a link up with European insurance companies. That is the way to secure development.
I appreciate there is a certain amount of nervousness about what some people see as an attempt to sell off the State silver but I have a different view which is that I honestly believe the taxpayer will be far better off when Irish Life have been sold. The reality is that the State gets £400,000 from this company. As I said on Second Stage, when the company are sold we will get £250 million. If we put this against the national debt there would be a saving of £25 million per annum to the taxpayer. Therefore, the taxpayer in my book will be far better off, to the tune of £24 million in simple figures, when the company are sold. As well as this, we will also receive a share when the profits come to be distributed.
Reference has been made to with profit policyholders. However, the number of such policyholders in Irish Life is extremely small as when the company developed their business in the seventies they expanded into the unit link market. At a guess, we would be talking about a small number, perhaps a few thousand.
The reason is that they stopped issuing them in 1985 for their own private purposes.
Those policies went out of fashion in the seventies as they could not sell them. People wanted to know what the value of their investment would be and they wanted the policy to be flexible to enable them cash in their investment.
They were much in vogue in the mid-eighties when they stopped selling them for a purpose.
The holders of other policies do not and will never get anything. Therefore it would be quite easy to confuse the issue. I respect the view being expressed by Deputies Taylor and Rabbitte who are thinking along different lines but it is my view that we are doing the taxpayer a great favour in this instance. I wish to see the jobs secured with the company being allowed reach their full potential. It is recognised that the people working in the insurance industry here are the best in the world. If the company expand into the European market, which they will be able to do from 1992 onwards, jobs will be created. Like everyone else, I am anxious to ensure reasonable controls are put in place. However, it would be too dangerous to impose too many restrictions which is what the amendment would do.
Deputy Rabbitte rose.
Deputy Rabbitte, Deputy Noonan has indicated that he would like to ask a quick question following which you will be given the opportunity to conclude the debate.
(Limerick East): If we insert a golden share provision along the lines proposed by Deputy Rabbitte, an Irish insurance company, a group of Irish insurance companies or an Irish bank would not be able to acquire, say, a 30 per cent shareholding but as against this three foreign based companies could each have a 15 per cent shareholding. While the golden share looks attractive in one sense in that it gives the impression we are defending our interests against foreigners if we look at it in another way control of the company could be lost to foreign companies who buy up tranches of shares. There is also the possibility that the company will remain in Irish ownership with the result that the matter is not as clear cut as it appears at first sight.
Deputy Noonan is absolutely correct when he says the matter is not clear cut but there is one way in which Irish ownership of the company can be secured beyond yea or nay and that is to leave it as it is with ownership vested in the people. Does Deputy Barrett not think the reason the big boys, the French, Germans and the Italians, would pay out £250 million is that they would be getting a bargain? If they were not, they would not touch them with a barge pole.
That is what free enterprise is all about.
Deputy Rabbitte appreciates that whatever about shares he is now limited to golden thoughts. There are only five minutes left.
I appreciate that my efforts to have a vote called on this matter have been thwarted. You were quite right to point that out to me.
On the contrary, the Deputy still has time to call a vote. We will strictly adhere to Standing Orders. The Deputy can ask me to call a vote.
I would like to do so because I have not been persuaded. Deputy Barrett knows more about insurance than I do but I do not want to start swapping kindergarten economics with him. However, it is misleading to use this smokescreen that the only economic return to the taxpayer has been by way of the dividend. I have not been persuaded and I think the only way is to try to ensure the golden share provision is enshrined permanently. I would like to call a vote.
The golden share provisions will prevent certain matters from occurring without the consent of the Minister, as holder of the golden share. These include any proposal to amend the golden share provisions themselves or the 15 per cent limitation on shareholders; to wind up or dissolve the company and to dispose of 25 per cent or more of the assets of Irish Life. As I said, the provisions embodied in the articles allow the directors to seek information. What Deputy Taylor has referred to may occur if such provisions were not embodied in the articles of association and nominee account holders could hold shares without disclosing this fact. However, no shareholders, individually or in concert will be able to acquire more than 15 per cent. If found out, they may be disenfranchised. The greatest penalty one can impose is the taking away of voting rights in a company such as this. I would prefer to go much further on some of the issues but the Bill aims to improve the outlook for Irish Life, their employees and the taxpayer.
Amendment put.
The Dáil divided: Tá, 24; Níl, 71.
Tá
- Bell, Michael.
- Byrne, Eric.
- De Rossa, Proinsias.
- Ferris, Michael.
- Garland, Roger.
- Gilmore, Eamon.
- Gregory, Tony.
- Higgins, Michael D.
- Howlin, Brendan.
- Kavanagh, Liam.
- Kemmy, Jim.
- McCartan, Pat.
- Mac Giolla, Tomás.
- Moynihan, Michael.
- O'Shea, Brian.
- O'Sullivan, Gerry.
- O'Sullivan, Toddy.
- Pattison, Séamus.
- Rabbitte, Pat.
- Ryan, Seán.
- Sherlock, Joe.
- Spring, Dick.
- Stagg, Emmet.
- Taylor, Mervyn.
Níl
- Ahern, Bertie.
- Ahern, Dermot.
- Ahern, Michael.
- Aylward, Liam.
- Barrett, Michael.
- Brady, Gerard.
- Brady, Vincent.
- Brennan, Mattie.
- Browne, John. (Wexford).
- Burke, Raphael P.
- Calleary, Seán.
- Callely, Ivor.
- Clohessy, Peadar.
- Connolly, Ger.
- Geoghegan-Quinn, Máire.
- Harney, Mary.
- Haughey, Charles J.
- Hillery, Brian.
- Hilliard, Colm.
- Hyland, Liam.
- Jacob, Joe.
- Kelly, Laurence.
- Kenneally, Brendan.
- Kitt, Tom.
- Lawlor, Liam.
- Leonard, Jimmy.
- Leyden, Terry.
- Lyons, Denis.
- Martin, Micheál.
- McCreevy, Charlie.
- McDaid, Jim.
- McEllistrim, Tom.
- Morley, P.J.
- Nolan, M.J.
- Noonan, Michael J. (Limerick West).
- Coughlan, Mary Theresa.
- Cowen, Brian.
- Cullimore, Séamus.
- Daly, Brendan.
- Davern, Noel.
- Dempsey, Noel.
- Dennehy, John.
- de Valera, Síle.
- Ellis, John.
- Fahey, Frank.
- Fahey, Jackie.
- Fitzgerald, Liam Joseph.
- Fitzpatrick, Dermot.
- Flood, Chris.
- Flynn, Pádraig.
- O'Connell, John.
- O'Dea, Willie.
- O'Donoghue, John.
- O'Hanlon, Rory.
- O'Keeffe, Ned.
- O'Malley, Desmond J.
- O'Rourke, Mary.
- O'Toole, Martin Joe.
- Power, Seán.
- Quill, Máirín.
- Reynolds, Albert.
- Roche, Dick.
- Smith, Michael.
- Stafford, John.
- Treacy, Noel.
- Tunney, Jim.
- Wallace, Dan.
- Wallace, Mary.
- Walsh, Joe.
- Woods, Michael.
- Wyse, Pearse.
Tellers: Tá, Deputies Byrne and McCartan; Níl, Deputies V. Brady and Clohessy.
Amendment declared lost.
On a point of order I was wondering if we could establish the whereabouts of the party who promised to reform the House.
Question put: "That the amendments set down by the Minister for Finance and not disposed of are hereby agreed to in Committee; in respect of each of the sections undisposed of that the section or, as appropriate, the section, as amended, is hereby agreed to in Committee; that the Schedule and the Title are hereby agreed to in Committee; that the Bill, as amended, is hereby reported to the House; that Fourth Stage is hereby completed and that the Bill is hereby passed."
The Dáil divided: Tá, 72; Níl, 24.
Tá
- Ahern, Bertie.
- Ahern, Dermot.
- Ahern, Michael.
- Aylward, Liam.
- Barrett, Michael.
- Brady, Gerard.
- Brady, Vincent.
- Brennan, Mattie.
- Browne, John (Carlow-Kilkenny).
- Burke, Raphael P.
- Calleary, Seán.
- Callely, Ivor.
- Clohessy, Peadar.
- Connolly, Ger.
- Coughlan, Mary Theresa.
- Cowen, Brian.
- Cullimore, Séamus.
- Daly, Brendan.
- Davern, Noel.
- Dempsey, Noel.
- Dennehy, John.
- de Valera, Síle.
- Ellis, John.
- Fahey, Frank.
- Fahey, Jackie.
- Noonan, Michael J.
- (Limerick West).
- O'Connell, John.
- O'Dea, Willie.
- O'Donoghue, John.
- O'Hanlon, Rory.
- O'Keeffe, Ned.
- O'Malley, Desmond J.
- O'Rourke, Mary.
- O'Toole, Martin Joe.
- Power, Seán.
- Fitzgerald, Liam Joseph.
- Fitzpatrick, Dermot.
- Flood, Chris.
- Flynn, Pádraig.
- Geoghegan-Quinn, Máire.
- Harney, Mary.
- Haughey, Charles J.
- Hillery, Brian.
- Hilliard, Colm.
- Hyland, Liam.
- Jacob, Joe.
- Kelly, Laurence.
- Kenneally, Brendan.
- Kirk, Séamus.
- Kitt, Tom.
- Lawlor, Liam.
- Leonard, Jimmy.
- Leyden, Terry.
- Lyons, Denis.
- Martin, Micheál.
- McCreevy, Charlie.
- McDaid, Jim.
- McEllistrim, Tom.
- Morley, P.J.
- Nolan, M.J.
- Quill, Máirín.
- Reynolds, Albert.
- Roche, Dick.
- Smith, Michael.
- Stafford, John.
- Treacy, Seán.
- Tunney, Jim.
- Wallace, Dan.
- Wallace, Mary.
- Walsh, Joe.
- Woods, Michael.
- Wyse, Pearse.
Níl
- Bell, Michael.
- Byrne, Eric.
- De Rossa, Proinsias.
- Ferris, Michael.
- Garland, Roger.
- Gilmore, Eamon.
- Gregory, Tony.
- Higgins, Michael D.
- Howlin, Brendan.
- Kavanagh, Liam.
- Kemmy, Jim.
- McCartan, Pat.
- Mac Giolla, Tomás.
- Moynihan, Michael.
- O'Shea, Brian.
- O'Sullivan, Gerry.
- O'Sullivan, Toddy.
- Pattison, Séamus.
- Rabbitte, Pat.
- Ryan, Seán.
- Sherlock, Joe.
- Spring, Dick.
- Stagg, Emmet.
- Taylor, Mervyn.
Tellers: Tá, Deputies V. Brady and Clohessy; Níl, Deputies Howlin and McCartan.
Question declared carried.
A Cheann Comhairle, before you adjourn the House may I wish you and all the Members of the House a very pleasant, relaxed, happy summer holiday?
That is kind of the Taoiseach.
On behalf of the Opposition——
What is left of it.
——may I echo the Taoiseach's remarks and wish him and yourself, a Cheann Comhairle and all Members a good summer? We will see you in October.
Obviously I would not like to part without wishing the Taoiseach and his colleagues in Government a restful summer. I hope we can make things at least as hot in the autumn as they have been in the summer.
The Dáil adjourned at 4.30 p.m. until 12 noon on Wednesday, 24 October 1990.