Vol. 453 No. 4
14 Ms Keogh asked the Minister for Finance the criteria, if any, which are applied by him to proposals that the State should invest further money in projects such as Irish Steel and TEAM Aer Lingus; if there is a unit of his Department charged with evaluating such investment; and if he will make a statement on the matter. [9434/95]
Proposals for the financial restructuring of commercial semi-State companies are considered, in the first instance, by the Minister directly concerned and by his Department. The proposals are subjected to appropriate commercial, economic and social analysis with the assistance of appropriate professional expertise by the Department concerned.
The conclusions reached following that process are then submitted to the Department of Finance for consideration. The end result of this process is that a total review of the State bodies' operations will have been carried out and any investment proposals will be considered in the light of that review.
As regards the companies mentioned. I refer the Deputy to the statements made in the House by relevant Ministers.
Will the Minister of State agree that it is proposed by the Government, subject to EU approval, to invest an extra £50 million in Irish Steel? Will he also agree that it is anticipated that TEAM Aer Lingus will incur losses in the next four years which will require an investment of £60 million in that firm?
Regarding Irish Steel, as the Deputy is aware the circumstances of that company have been dealt with in the House.
I am asking for confirmation of the proposed £50 million investment.
That is the figure. The implementation of the Irish Steel viability plan, which had been based on a report of Simpson Xavier Consultants, began in September 1994. The plan includes a request for an investment of £50 million comprising £40 million in equity and £10 million in loan guarantees. Under the rules of the European Coal and Steel Community a national government may not subsidise a steel company which is unable to achieve long term viability. In considering applications for State aid to the steel industry the European Commission applied the criterion that the recipient should achieve viability within a three year timeframe. The Commission is presently examining the Irish Steel plan and has appointed its consultants. It is anticipated that it will be some months before the Commission and the Council of Ministers finally decide on the application. The Government and Irish Steel accepted a recommendation of the Simpson Xavier report that in tandem with this reorganisation the company should attempt to attract a strategic partner. Negotiations are taking place with a number of potential investors. Securing a partner would be likely to improve the prospect of obtaining EU approval for the company's viability plan. If a strategic partner is secured, that partner would be expected to contribute to the investment programme, details of which would be a matter for negotiation. The Government has retained the Investment Bank of Ireland to assist in assessing the proposals from prospective investors.
Regarding TEAM Aer Lingus, the State has already invested £125 million in the Aer Lingus group as part of the restructuring plan approved by the Government. The final tranche of £50 million will be paid over in December subject to the approval of the EU Commission. That final £50 million was paid in 1994 into the special account provided under section 16 of the Air Companies (Amendment) Act, 1993 and, therefore, it does not impact on the 1995 budget. In his statement of 17 May, the Minister for Transport, Energy and Communications, Deputy Lowry, outlined the measures proposed in the five year business plan for TEAM submitted by the chairman of Aer Lingus. The proposals do not envisage State investment in the company, but do envisage the Aer Lingus group providing in excess of £60 million in interest free loans to TEAM.
I wish the Minister of State well in his new role. He referred to the criteria applied to semi-State companies, two in particular. Does he know if it continues to be the policy of the Department of Finance that semi-State companies, particularly groups such as Aer Lingus and Telecom Éireann, should dispose of as many of their subsidiaries as possible? Regarding the attempts of the Department of Finance to reduce substantial debts, particularly in Telecom Éireann, is it its view that cash should be raised by the disposal of subsidiary companies and is it pushing for that? I appreciate that is something he may not be able to answer today given that it is his first day dealing with questions relating to that Department, but if he has a view on this matter, I would be interested in hearing it.
Having a view on the matter and answering the Deputy's question might not produce the right answer. To be honest, I do not know the current position, but I will find it out and inform the Deputy.
The latter part of the question on whether the Department has expertise charged with evaluating such investments is valid. The Minister mentioned that the Department used outside investment companies. Having regard to the multi-million pound projects and the semi-State sector being so valuable, is it not time that the Department employed experts to evaluate projects rather than employing outside expertise at a heavy cost to the taxpayer?
I presume the Deputy is speaking of my reference to the Investment Bank of Ireland assisting in the securing of a partner for Irish Steel.
Given that the semi-State sector has been experiencing such misfortune in loss making areas, it is important that the Department employ financial experts to assess and evaluate projects involving State investment.
Some of the greatest financial minds who evaluate projects are employed in the Department of Finance.
I hope the Minister is not telling me that the spin doctors are the financial experts.
The Deputy has put his question.
Within the Department of Finance there is a high degree of expertise capable of evaluating projects, but I do not consider that a good argument against occasionally bringing in experts with proven ability in specific areas, particularly that of finding an international strategic partner for Irish Steel. That type of expertise would hardly be appropriate in the Department as it might not be needed often and, in the overall context, it would cost more to employ such people to be available to deal with an occasional task. It makes sense to use outside experts in such cases.
Is the Minister aware that workers in Sunbeam in Cork and Packard in Dublin feel badly done by in that their companies and jobs are being taxed out of existence while £50 million and £60 million is being thrown at concerns in the semi-State sector in their cities? Will he ask his colleague, the Minister for Finance, to work out some rationale as to why some jobs are hammered out of existence to subsidise others which seem to be in a privileged area with no better prospects for viability?
I do not accept that type of simplistic analysis, particularly from somebody of the Deputy's ability.
As the Deputy's colleague knows, I do not have the primary certificate.
Regarding Irish Steel, all solutions are unpalatable and expensive. There is no simple solution to the problem. I know something more about the position in Irish Steel than TEAM Aer Lingus. Regarding Irish Steel it is not a question of the Government saying will we invest £50 million or nothing. The problem for a Government in dealing with such a matter is that it involves £50 million, £40 million, £35 million or some other horrendous figure to do something else. It is not simply a matter of giving £50 million to Irish Steel and nothing to Sunbeam.
The difference between Packard and TEAM Aer Lingus is that the Government can let Packard go to the wall at no cost.
If and when a viable business plan requiring substantial State aid is put forward for Sunbeam, that State aid will be provided. I am sure the Deputy would be the last person to suggest that the State should simply bail out an industry that is not viable.
I am not suggesting that.
Sunbeam can become viable, but an investor is required. That matter is being discussed by Forbairt and if a sensible solution is reached requiring substantial State aid, that State aid will be provided.
Which is the more viable, Sunbeam or Irish Steel?
The Deputy knows that is a ridiculous question.
