I move: "That the Bill be now read a Second Time."
The purpose of this Bill is threefold. By its enactment, the National Development Corporation will be amalgamated with the Industrial Development Authority, and its assets, liabilities and commitments will consequently be transferred to the IDA.
The Bill also makes provision for a number of amendments to the Industrial Development Act, 1986. These will allow the Industrial Development Authority to hold or dispose of stocks, shares and securities transferred from the National Development Corporation. The proposed amendments will also increase the financial limits relating to the aggregate amount of grants which may be made to the IDA by the Exchequer, as well as extend the applicability of employment grants to all industry. Additionally, the IDA are being given greater power in relation to the holding of preference shares, and the power to hold shares in their own name.
Finally, the Bill will increase the aggregate financial limits applicable to SFADCo which are contained in the Shannon Free Airport Development Company (Amendment) Act, 1986.
It is the second and third of these objectives which makes it a matter of some urgency that the Bill be enacted before the Christmas recess. One of the amendments which I propose making to the Industrial Development Act, 1986, has to do with the aggregate amount of capital grants that I can make to the IDA so that they can, basically, carry out their mandate. This aggregate limit was set by section 14 of the 1986 Act at £700 million. The capital grants concerned are used by the IDA to meet their administrative expenses and to discharge their obligations or liabilities of a capital nature and are, of course, the basic resources used by the Authority to fulfil their statutory functions.
The difficulty is that the IDA will, by the end of 1991, have utilised £688 million of the limit, and it is expected that the £700 million limit will be exhausted in a few weeks' time — certainly before the Dáil reconvenes in January. It is, therefore, critically necessary that the limit be raised now, so that the Authority can continue to carry out their statutory functions without interruption. The proposal in section 9 of the Bill is to raise the aggregate limit to £1,200 million, which will enable the IDA to continue assisting industry, without recourse to the Oireachtas for legislation for a further period of five years approximately.
The same difficulty arises in the case of Shannon Development. The last occasion on which legislation increasing the company's financial limits was enacted was June 1986, and the limits concerned were actually reached in Shannon's case at the end of last month. Thus, it is equally urgent that the aggregate limits applicable to SFADCo should also be raised as soon as possible.
As far as SFADCo is concerned, section 10 of the Bill provides for: (1) an increase from £130 million to £150 million in the aggregate amount that the Minister for Finance may subscribe in taking up shares in the company; and (2) an increase from £105 million to £150 million in the aggregate amount of grant-in-aid, voted annually, which may be made to the company.
Share capital subscribed to the company is used for capital expenditure on the industrial estate at Shannon and in the mid-west region. The main elements of expenditure are land acquisition, construction of factories and ancillary works. The grant-in-aid moneys are applied towards meeting the company's running expenses and providing financial assistance to companies on the Shannon Industrial Estate.
Turning back to more general issues, Deputies will be aware that the Industrial Policy Review Group which I established last June are due to complete their report very shortly. I assure the House that I intend to take all appropriate action open to me once it becomes available. Deputies should not confuse this Bill with any measures which the review group may recommend as I propose to deal with these swiftly at a later stage. The reason for proceeding with the Bill at this time stems from the fact that the statutory limits on the grant-giving powers of both the IDA and SFADCo are just about exhausted, and new legislation is required to extend them. Furthermore, by amalgamating the National Development Corporation with the IDA, I am continuing the process of rationalisation and refinement of the State's industrial promotion activities.
The Review of Industrial Performance, published in December of last year, drew attention to the large number of promotional measures undertaken by different State agencies, the increasing use of equity by the IDA in assisting companies, and the move to a situation in which up to 50 per cent of financial supports to medium and large indigenous industry would be in the form of equity or other remunerating forms of aid. The review also pointed to the improved flow of equity into Irish industry through private venture capitalists, the smaller companies market and the Irish Stock Exchange generally.
Such developments have lessened the justification for a separate State agency mandated to promote equity investment. It has become difficult to distinguish NADCORP's developmental role from that of the IDA. Furthermore, with the IDA increasingly taking equity in projects it supports, as well as imposing stricter conditions relating to job performance and repayability of grants, any distinction between the two agencies on the grounds of commerciality is somewhat nebulous. By 1993, IDA shareholdings are likely to be considerably greater than anything to which NADCORP could aspire.
The review concluded that in order to provide a more cohesive and integrated approach to State equity investment in enterprise, the activities of the corporation and the Authority should be more closely integrated.
The legislation now before the House is the latest in a series of significant developments which have taken place since 1987 in the restructuring of the State agencies involved in industrial development and promotion. Other such restructuring included: the establishment of FáS to take over the functions previously undertaken by AnCO, the Youth Employment Agency and the National Manpower Service; the merger of the National Board for Science and Technology and the Institute for Industrial Research and Standards to form Eolas, a single agency with responsibility for the development, application, co-ordination and promotion of science and technology in Irish industry; and the merger of Córas Tráchtála and the Irish Goods Council to ensure that the State provides marketing support to Irish companies from a single source.
The integration of the activities of the National Development Corporation with those of the IDA is a logical step in this process of restructuring of our industrial development mechanisms. I should now like to trace some of the history of the corporation and the changing circumstances within which its continued existence as a separate entity no longer remains appropriate.
The National Development Corporation was established under the National Development Corporation Act, 1986. Its primary objective, as set down in section 10 of that Act, was to establish, invest in or manage any enterprise which the corporation considered to be profitable and efficient, or capable of becoming so. It was also mandated to establish an investment fund, known as the "Revolving Investment Fund for Employment", into which was paid any money realised on investments, dividends and any profits earned by the corporation. The fund was intended to be used to fulfil any investment objects of the corporation.
To date, NADCORP have invested approximately £26 million and currently hold shares in 57 companies which employ around 2,000 people. Their performance has, however, fallen below expectations, with the corporation rarely drawing down their budget allocation. It is generally accepted that State support is necessary to encourage new developments and to help offset the various dis-economies facing Irish industry. However, State support can take a number of different forms, such as grants, equity or repayable advances. The only essential distinguishing factor of the different forms of State support is whether the aid is "free" or remunerating.
In January 1990 I took the opportunity, at the launch of a promotional video, to emphasise NADCORP's developmental role, with the corporation participating as an integral part of the Government's overall industrial development strategy. While the private venture capital market was relatively underdeveloped when NADCORP was established, in the intervening years there had been a significant growth in venture capital support mechanisms. I pointed out that it was necessary to reassess NADCORP's role with a view to increasing the focus on developmental and strategic projects.
I expressed the view then that there was a need for a switch in emphasis, with NADCORP becoming more developmental while retaining a long term commercial objective. There was, and still is, a pressing need for the development of certain indigenous sectors of strategic national importance, such as indigenous electronics and software. I indicated that an important objective for me, as Minister for Industry and Commerce, would be to integrate NADCORP's operations more fully into the central focus of industrial policy.
As of 30 September of this year, the IDA held both ordinary and preference shares in some 113 companies amounting to a total value of £21 million. This amount is likely to increase significantly in the next few years as the IDA, in order to ensure a better return for the State's investment in the development of industry, are increasingly using this form of support to indigenous industry.
I believe, in the light of these considerations, that there is no case for the continuation of NADCORP as a separate entity. One of the purposes of this Bill is to merge their activities with those of the IDA. This will provide a more coherent and integrated approach to State equity investment. Allied to this are the proposals contained in the Bill to allow the IDA to hold or dispose of stocks, shares and securities transferred from the National Development Corporation. IDA will be permitted to hold more than 50 per cent by way of preference shares and will also be given the power to hold shares in its own name. Such shares were previously held in the name of the Minister for Finance.
In merging the activities of the two agencies I do not propose to extend the IDA's existing remit, which enables it to invest in industrial and international service activities. While NADCORP's mandate was somewhat broader, allowing them to invest also in most commercial undertakings, their investments were in the main concentrated in manufacturing companies. Nevertheless, section 7 of the Bill will allow IDA to invest by way of the purchase or taking of shares in enterprises where NADCORP currently have holdings to which the IDA's remit does not extend. It is intended that all NADCORP's property, rights and liabilities will transfer in the first instance to IDA. Subsequently, insofar as SFADCo and údarás na Gaeltachta are charged with responsibility for development in regions where certain NADCORP holdings are situated, such holdings will be transferred to SFADCo or údarás na Gaeltachta as appropriate.
The Bill also provides for the preparation of the final accounts of NADCORP and their presentation to the Houses of the Oireachtas. As is usual in legislation of this sort, there is a provision in the Bill to exempt the IDA from the payment of stamp duty in respect of the properties and rights transferred to them under this Bill. There are also provisions to ensure the continuity of any contracts and agreements entered into by NADCORP and to ensure that any legal proceedings to which the NADCORP is a party will not be brought to a halt on account of the transfer of NADCORP's assets and liabilities to the IDA. The rights and liabilities transferred by the Bill may be sued on and recovered by and from the IDA.
As I mentioned earlier, I propose, with the agreement of the House, to make a number of amendments to the Industrial Development Act, 1986. I have already referred to the urgent need to raise the aggregate grant giving limits permitted by law. In addition to these, and amendments stemming directly from the amalgamation of NADCORP with the IDA, I also intend, for example, to extend eligibility for employment grants from the current restriction to small industry to all industry. Small industry is defined for this purpose as companies employing fewer than 50 people and with fixed assets of less than £800,000. The IDA have found that employment grants, which are more targeted on employment per se and less on the acquisition of fixed assets, can provide a useful additional flexibility in their industrial promotion activities. This is also in accordance with the commitment made in the Programme for Economic and Social Progress to widen the use of such grants.
The Bill also amends the provision of the Industrial Development Act, 1986, which requires that shares purchased or taken by the IDA shall be registered in the name of the Minister for Finance. This requirement does not exist in relation to the existing NADCORP portfolio. I believe that the provision in the Industrial Development Act, 1986, concerned acts as a disincentive to the increased use of investment by IDA in their industrial promotion activities. Consequently, the Bill provides for the transfer to the IDA of shares which have been purchased by the IDA but are currently held in the name of the Minister for Finance. The IDA will also be given the power to retain all amounts representing the dividends from these shares.
I would emphasise to the House that industrial policy must be seen in its broadest sense as including all of the factors through which public policy can influence industrial development. It is not just a question of Government and State agencies providing industrial incentives but must of necessity include the active participation of all players in the economy — employers, employees and consumers. As I pointed out in the preface to the Review of Industrial Performance last December, I will continue to make further changes in our industrial policy as are required. The full range of promotional and advisory activities must be subjected to a continuing system of objective evaluation which relates expenditure undertaken to defined objectives and measures of performance. I will be keeping under consideration the possibility of further refinement of our policies with particular emphasis on the need to develop a strong indigenous industrial sector.
I mentioned at the outset that I established the Industrial Policy Review Group last June to examine all aspects of public policy which impinge on industrial development, including the taxation system, PRSI, manpower, education, training and industrial supports. The group have been concentrating on the development of Irish-owned companies and examining how policy could be adjusted to boost the development of indigenous industry in the medium and long term. I expect to receive their report shortly and I will act on it with all necessary speed.
The actions which I am now proposing do not in any way detract from whatever actions may be necessary as a result of the group's report. They are very relevant and will ensure further progress in refining our range of industrial incentives. They will also ensure that we can maintain a flexible response allied to securing the best possible value for the expenditure of scarce State resources.
Finally, I would just re-iterate the particular difficulties which make it necessary to have the Bill enacted as soon as possible — in other words, the issue of the exhaustion of the aggregate grant limits applicable to both IDA and Shannon Development.
I commend the Bill to the House.