Dáil Éireann debate -
Thursday, 9 Nov 2000

Vol. 525 No. 4

ICC Bank Bill, 2000: Second Stage.

Question proposed: "That the Bill be now read a Second Time."

Minister of State at the Department of Finance (Mr. Cullen):

The purpose of the Bill is to provide for an increase in the authorised share capital of ICC Bank and to put in place the enabling provisions required to facilitate the future sale of ICC Bank subject to the approval of the House at the appropriate time.

As Deputies may be aware, the Government decided in mid-1998 to dispose of the State's interest in ICC Bank plc because of the fundamental changes in the banking sector and the economy generally. Following this decision, a sale process was initiated and the House will recall that the Minister for Finance suspended this temporarily in December last year. At that time, the Minister asked the board to review all the options for the future and he reiterated his view that the status quo was not an option.

The board has carried out such a review and recommended that the bank should pursue the option of seeking a strategic partner or an outright sale because it would benefit from access to capital, broader expertise and, possibly, international opportunities. The staff of the bank fully supported this view and the Minister has mandated the board to explore the options in relation to this course of action. He has also authorised the board to oversee the negotiation of a new employee share ownership plan which was provided for in the ICC Bank Act, 1999, last year.

The negotiations have been completed. The ESOP has been agreed and the employees accepted it by ballot on 9 October. The ESOP, which is being put in place in the context of a sale, consists of a 14.9% stake in ICC, of which 5% is in return for change in the bank and 9.9% is being purchased.

One of the main purposes of this Bill is to provide for an increase in the authorised share capital of the bank. The current authorised share capital of £40 million has been largely subscribed. The bank is continuing to grow strongly and as long as it remains in public ownership, the shareholder has to provide the necessary share capital. It is the Minister's intention to subscribe for the shares available to him in a £15 million rights issue which the Bank intends to carry out following the enactment of this legislation. The other objective of the Bill is to put in place the enabling provisions to facilitate a change in ownership.

ICC Bank has expanded steadily and has enjoyed consistent profitability. While the State has made equity investments totalling £36.9 million over the years, the bank has grown through retained profits and deposits and loans to a stage where its balance sheet now amounts to more than £2.8 billion. In 1998, the bank made pre-tax operating profits of £23 million. ICC announced its interim results in April of this year. These showed pre-tax profits up by 64% to £18.3 million and the cost to income ratio reduced to 35.8% from 47.1 % for the same period last year. In any assessment of the contribution of ICC Bank, its performance in the venture capital field deserves special mention. It has had a pioneering role in the provision of such funding in Ireland and the bank continues to hold a market leader role in the venture capital area, an area which is vital to ensure the continuance of the accelerating development of Irish SMEs.

The strong performance of the bank during the last 12 months shows it is in a strong position. It confirms the strengths of the bank in its specialist market segments. I have every confidence in the bank going forward. However, I see the long-term future of the bank being best served by a change in ownership and both the Minister and I would like this to happen sooner rather than later. The skills and expertise in ICC will be best used under the umbrella of a bigger commercial operation. The board, management and staff of the bank are all agreed in this.

I will now turn to the main provisions of the Bill. Section 1 is the definitions section and is self explanatory. Section 2 is a standard provision in relation to the expenses of the Minister. Section 3 provides for an increase in the authorised share capital of the bank from its current limit of £40 million to £80 million. It is the Minister's intention, as he has already indicated in public, to make sure that the bank remains adequately capitalised as long as it remains in State ownership. Almost £37 million of the current limit has been subscribed. He proposes, following the enactment of the legislation, to subscribe a further £15 million which will meet the present needs of the bank.

Section 4 provides for the disposal of shares by the Minister for Finance. It also currently provides that a motion for approval by the House is required in the event that any disposal of shares would result in the Minister's shareholding dropping below 50%. Following concerns raised by the Opposition, particularly by Deputy Noonan, I have reflected on this provision and I intend to introduce an amendment on Committee Stage which will provide that a disposal of shares, other than those for the ESOP, will require a motion of approval from the House. I trust that this will meet the concerns expressed. There is no proposal before the Minister for Finance from the board at present, but he would like to be in a position to react quickly should any such proposal emerge. I hope the motion of approval will meet the concerns of the Deputies in this matter.

Section 5 provides for the continuation of existing guarantees given by the Minister. No guarantees will be given in the future and the amount which is subject to guarantee will continue to be reduced as existing facilities expire.

Section 6 is a standard provision requiring ICC Bank plc to take relevant action to alter its memorandum and articles of association in the context of the Companies Acts to make them consistent with the terms of the Bill.

Section 7 and the accompanying Schedule to the Bill will only come into play if and when the bank is sold. This section provides for the repeal of the ICC Bank Acts, 1933 to 1997, and the deletion of references to ICC in other legislation. The purpose of these repeals and deletions is to ensure that ICC Bank, once sold, will operate on the same basis as any other private commercial bank. They will be given effect by ministerial order under section 8(2) of the Bill. The relevant order will not be made until ICC Bank plc is formally granted a licence by the Central Bank.

Section 8 gives the Short Title and commencement provisions.

I commend this Bill to the House.

Mr. Noonan:

I welcome the Bill, particularly given the Minister's commitment to remove by amendment on Committee Stage the proposal which should not be in the Bill. ICC is a good, small and highly profitable bank, with pre-tax profits up by 64% to £18.3 million. I compliment the effective and efficient management of the bank and the dedicated staff. While the banking industry in general is not the most popular, particularly following the debate the on liabilities of various financial institutions for DIRT, it is noteworthy that the ICC had little or no liability.

One of my first official functions when I became Minister in 1982 was to open a new ICC office in Limerick. Because of that and my ongoing relationship with the bank I have an interest in it.

A number of questions arise from the Minister's speech. The policy in the Department of Finance seems to be that ICC should and will be sold. There is probably not much future for small banks. The report of the committee into the banking industry in Ireland, under the auspices of the Department of Finance, indicates there is not much opportunity for smaller banks. They cannot impact on the market and have difficulties of scale which makes it difficult for them to be profitable. They are also vulnerable to take-over or buy out. Even the main commercial banks – AIB and Bank of Ireland – are quite vulnerable when their share price is low, as it was earlier this year. The vulnerability arises from a major European bank purchasing them, now that we share a common currency with the main EU countries and where exchange rate difficulties do not arise. The other danger is that an American or Japanese bank which wants a banking presence in the Euro zone will use Ireland as a foothold, given that it is English-speaking. Therefore, while the banking industry is profitable and effective in Ireland, it is vulnerable. While the considerations which apply to AIB and Bank of Ireland are different from those which apply to ICC, ACC and the TSB, there are also similarities.

The current management of ICC are doing a very good job. The bank is profitable and the loan book seems good. They have operated very successfully in a niche market and their movement into the provision of venture capital has been successful. Therefore, it seems there is some information which has not been put at the disposal of the House about ICC, and I would like to tease this out with the Minister to see if he can fill the gaps when he is replying on Second Stage or on Committee Stage.

Last year it seemed ICC would be sold. When the Minister initially made his announcement there seemed to be a certain degree of interest in the market which was sufficient to trigger detailed inquiries from four financial institutions. After they had examined their position in a serious way, one major financial institution went to the line with a developed offer to purchase the bank. Yet sometime between 8 December and Christmas the bottom seemed to fall out of the offer. This has never been fully explained, either in the Committee on Finance and the Public Service or in the House.

I know there are arguments to suggest the banking industry had changed internationally and had changed substantially in Ireland, that the DIRT liabilities were overhanging the industry, that values which would have been realistic in July were no longer realistic by Christmas and that in effect there was a general marking down of the values of banks, big and small, the consequence of which was that the purchaser of ICC became very reluctant. There is another story in financial circles in Dublin which has not been adequately addressed either by the management or the Department of Finance. It says that when the due diligence was carried out by the purchaser, they did not particularly like the balance of the loan book.

No adequate explanation has been given to the House as to why a deal which was on the verge of being concluded suddenly collapsed. If I recall correctly, officials of the Minister's Department had spoken to Deputy McDowell and me at the time on the basis of giving speedy passage to legislation before the Christmas recess to enable the sale proceed. It is a good bank, it is well managed and has a good loan book. What I want from the Minister is the strongest possible confirmation of the excellence of this bank in the interests of the bank because the conclusion, which was inconclusive, and the fact that the sale did not go ahead have put an overhang on the prospect of a successful sale of the bank. The Minister is following the right course. ICC should be sold. I do not know whether it can be sold in full or in part. The Minister in this Bill sought the power to sell up to 50% of ICC without referring back to the House. That was a serious mistake. It is a bank owned by the people and the representatives of the people should be given the oppor tunity to sign off on it in some formal way if a portion is to be sold.

I have no objection to the proposal that the Minister may, without reference to the House, proceed with the employee share ownership plan. We have all agreed that in any sale there should be employer participation and shares should be available to employees. That is already agreed and if the Minister needs the power to make these arrangements without referring again to the House I have no difficulty in agreeing that. However, I do have a difficulty in agreeing a proposition whereby a partner would come in, an arrangement would be made and a deal would be done and Members would read about it in the newspapers. There is too much of this going on here and in circumstances where the ultimate owners of ICC, to the extent of 98.5% of the shares, are the people of Ireland there should be reference back here. I thank the Minister for committing himself to introducing this amendment on Committee Stage. It is the only controversial aspect of the Bill. I have no difficulty with the remainder of the Bill.

On the extension of the share capital from £40 million to £80 million, the issue from the State side is about £38.5 million already. It has almost reached the ceiling available under present legislation and the extension is necessary. As with the raising of all ceilings whether for State boards or State banks I presume there is no intention that the bank will work its way up to the ceiling immediately. I note in the Minister's contribution that he envisages subscribing about £15 million.

In terms of the equity base of the bank and the issue of shares being sold to employees, I wish to raise one issue with the Minister which I raised with the chief executive of the company when he came before the Joint Committee on Finance and the Public Service. ICC is publicly quoted but the Minister for Finance holds more than 98% of the shares. While there is a small private holding of shares, it is not a very active share on the stock market. There is a quotation for ICC but there is not an active market in ICC shares. The basis of share options for employees and the basis of favourable purchase arrangements for shares by employees or the realisation of a capital gain on shares, whether ex gratia or purchase by employees, is the availability of a market. While the ESOP is developed on the one side in the allocation of shares to employees, there is no mechanism that I know of where the employees can realise the value of the share because there is no real value in the share. Is it the intention that they would go to the stock market and that willing purchases would emerge? It is difficult to envisage that happening. I do not know when last there were transactions in ICC shares. The Minister may get advice on when the shares were last traded and what kind of monthly volumes are going through on the stock market. It is not an active share because the private holding of the share is so small. It seems to have a valid ESOP that a market must be created. I would like to hear the Minister's views on the creation of that market.

It is a good bank. Any minor clouds that hang over it from the failure of the sale last year should be removed by a very strong statement from the Minister. I support the Minister's policy of proceeding to sell to the best possible partner either on a partnership basis or to sell the bank completely. That is a matter for the management of the bank and the Minister. In the final analysis, this House should sign off on any such arrangement. I welcome the fact that the Minister has given a commitment to amend the Bill to allow us do that.

The other sections are routine and are of no great consequence. Fine Gael will support the Bill. We have points to make on Committee Stage but we will not divide the House on Second Stage.

Mr. McDowell:

I move amendment No. 1:

To delete all words after "That" and substitute the following:

"Dáil Éireann declines to give the Bill a second reading on the grounds that the stated reason for its urgent enactment (in order to increase the funds that may be subscribed for the Bank's share capital in order to restore capital adequacy ratio) should more properly be dealt with in separate legislation, rather than being added to unconnected provisions that enable a change of ownership of the Bank, which deserve more detailed consideration by the Oireachtas and do not require immediate legislation.".

I opposed the previous effort by the Government to sell off or privatise ICC and I am still opposed to efforts in that regard. My first thought this morning is with the staff and management of the bank because they have been badly served by bungled Government efforts to dispose of it and by a measure of indecision which preceded this Government coming into power in relation to the future of the banks. At best there has been indecision and uncertainty for the past five or six years. Clearly that has not helped either the staff or the bank in terms of their morale or the management of the bank in terms of trying to devise a future for the bank. That is unfortunate.

As the Minister of State is aware, we came to the cusp of sale about a year ago in circumstances which, as Deputy Noonan said, have never been properly explained. In the event it did not happen. That was unfortunate because it would have represented a decisive change in where the bank was at. During the course of the summer the Minister's official, Mr. David Doyle, assistant secretary, came before the Joint Committee on Finance and the Public Service on 19 July 2000. He gave an interesting expose as to where the bank was at. He explained what had happened in 1999 in relation to the abortive sale of the bank. Effectively he said there was a change in the banking environment, that financial stocks had fallen over the previous period and that there was increased competitiveness in the market. He spoke specifically about the Bank of Scotland's entry into the mortgage market and Northern Rock's entry into the deposit market and the reduced profitability and increased competition which resulted from that. In response to all of that in December 1999 the Government withdrew ICC from the market for the present. I do not have a difficulty with that analysis. I am prepared to accept it at face value. I do have a difficulty, however, with trying to understand what has changed since then.

The circumstances and the environment in the banking sector are much the same as they were a year ago. If anything it is more competitive. Banking stocks or stocks in the financial sector generally are lower now than a year ago. In respect of a potential sale, the environment is certainly no better than a year ago and one could easily construct an argument for saying it is a good deal worse than a year ago. The possibilities of the State realising good value for the bank are diminished and obviously the prospects for the bank in any new circumstances are diminished because there is likely to be less interest in acquisition or takeover. I ask the Minister to address what has changed since 1999 to make him willing to undergo another effort to sell. I assume that is what the Minister has in mind.

The Minister for Finance has said, since he came into power, that "the status quo is not an option”. He has consistently told us he does not have any particular prescription in mind but that the status quo is not an option. All of us listening to him knew what he meant. He has been seeking to get rid of, sell or float off this bank from the moment he took office, for reasons which are entirely ideological and not driven by the best interests of the bank. Only a few weeks ago, Mr. Michael Quinn, the managing director of ICC, appeared before the Committee on Finance and the Public Service. He gave an interesting history of the bank and expressed, relatively briefly, his views as to where the bank should go from here. I read his comments again this morning with some interest. He described how in the 1970s and 1980s the ICC operated as what he termed “Ireland's development bank for business, providing SMEs with longer-term finance than was available in the market place”. He said some of this finance was provided on concessionary terms for business with support from the State. He went on to say that these were key industry support facilities at a time of sustained, high domestic interest rates and industry under capitalisation. He also spoke about how the bank had managed to blend profitability while still providing concessionary assistance to SMEs. That is precisely the argument that I have been making during the course of this debate – that there is a real role for a development bank of that kind, that ICC has developed that niche quite well, and that nobody else is doing that job, or at least there have been times in the past when nobody else has been doing that job.

I freely acknowledge that it is easier now for SMEs to come across venture capital than it was ten or 20 years ago. None of us, however, has a sufficiently short-term view of the future to consider that we could not find ourselves once again in circumstances where SMEs would require a certain amount of development assistance provided through the banking sector and directly or indirectly through the State. That is the major strategic role ICC has so successfully played in the very recent past and which it could be called upon to play in the future.

It is true that in the past my party has taken an ideological view that the State sector was good and the private sector was perhaps not quite so good. It has traditionally opposed most privatisations, though not all, that have been carried out in recent years. I do not take a strictly ideological view of this matter. We have to look at semi-State companies on a case by case basis. The primary criterion has to be whether those State companies, or the State ownership of those companies, fulfils any significant strategic role.

Looking at the three banks – the TSB, ACC and ICC, but excluding the Post Office Savings Bank – which are currently within the State sector, one can come to different conclusions. I came to the conclusion quite some time ago that ACC and TSB were effectively, to use Deputy Noonan's phrase, "just small banks" which would find it difficult over time to remain profitable and to fulfil a significant role. I felt, and still do, that there is no good strategic reason for retaining those banks within the State sector. I supported the effort to set up a new bank and I am following with interest the current efforts to resurrect a proposal of that kind or to formulate a new developmental proposal for those banks. My view is that both banks would be better off in the private sector, which would allow them to form the sort of strategic alliances that would help them in future. I do not take the same view of the ICC, simply because there is a genuine strategic role for that bank to fulfil and to which we may have recourse in future. That is to acknowledge that at the moment its role is less obvious than it might have been in the not too distant past.

The Department of Finance published the document, The Banking Sector: Some Strategic Issues, over the August bank holiday weekend. The report makes interesting reading and looks at the issues of competitiveness, mergers and monopolies. It is very long on analysis but, unfortunately, pretty thin on proposals for charting a future for the banking industry. It mentions the facts with which we are all familiar, that Irish banks are relatively profitable, that there is a concentration in a relatively small number of banks, and that there is a reasonable level of competition in terms of providing services to customers in the domestic retail market. It then uses an interesting phrase, stating that "the group was not satisfied that it had sufficient information available to it on the cost of borrowing for small business, to draw a conclusion on the competitiveness of the cost of this type of financing". This is precisely the area where ICC is active in seeking to assist SMEs by providing facilities for them. I am interested that the group set up by the Department was not able to draw a conclusion that that is being done on a competitive basis, even now, in a significantly more competitive market than we had ten years ago. Many small businesses are still being screwed in their dealings with the banks and that is one significant reason the State should maintain a toe-hold or a competitive leverage within that sector.

The Bill seeks to give the Minister power to sell ICC, subject to a resolution being passed by the House, and it also seeks to increase the capitalisation of the bank. I have no difficulty with increasing the capitalisation of the bank. Traditionally, we have under capitalised virtually all our semi-State companies, and ICC is no exception. I am quite happy to support that move but I continue to be opposed to the way in which the sale mechanism would be approved by this House. I have already said that, in any event, I am opposed in principle to the sale of the bank, but neither am I satisfied to sign what is effectively a blank cheque. Prior to this it would have required legislation to do so. We went through the legislation last year and at least that process allows the House an opportunity to examine proposals that are put before us, either in committee and to a lesser extent on Second Stage. I am not convinced, however, that debate on a resolution would have the same effect. I am not sure we would be able to do it in exactly the same way. There is always a risk that resolutions of the House simply pass without anyone noticing them. In any case, the deal will very likely be done and dusted by then, and the resolution simply becomes a post facto confirmation of something that has already been done by Government. I do not like that position. No doubt it helps the Minister and the board, in going to potential purchasers, if they can say a minimum of legal red tape is required to dispose of the Minister's interest. I certainly would not approach it from that angle. If we are seeking to sell a State asset we should give it every possible scrutiny in this House. I am opposed, therefore, to using the mechanism that is set out in the Bill, which is effectively a blank cheque. In the current circumstances of the banking market, it could be a fire sale. This is not a good time to sell because the market is not good for obtaining full value for the State. It is not in the interests of the bank and the honest answer is that we should not sell it, period.

I have a couple of questions concerning ESOPs. An ESOP has recently been approved by the Government and I assume that at this stage it has been accepted in principle by the staff, as well. It is a good thing. I like the principle of participation by the work force in ownership of the company through profit sharing in the event that the company is profitable. I do not, however, like ESOPs or ESOTs to be used as a bribe to facilitate privatisation. In principle, there is no reason we should not extend part ownership of virtually all the semi-State companies to their work forces As the Minister knows, that was done with Aer Lingus some five or six years ago when 5% ownership was granted to the staff. I see no reason we should not move to do that now. Within the State sector, ESOPs are effectively being used as a bribe to facilitate privatisation, but that link needs to be broken and should be broken forthwith.

As the Minister will know, I have a difficulty in principle with the disposal of the bank. I also have a difficulty with the mechanism proposed for this in the Bill, and for that reason I have moved the amendment in my name.

Mr. Ardagh:

I wish to share my time with Deputy Wright.

An Leas-Cheann Comhairle:

Is that agreed? Agreed.

Mr. Ardagh:

Perhaps you could tell me when I have spoken for nine and a half minutes?

An Leas-Cheann Comhairle:

Very good.

Mr. Ardagh:

I must contradict Deputy McDowell as regards the morale of staff in ICC. Recently, I spoke in a social context to junior and middle-ranking staff members in ICC. I have spoken to senior members of the ICC in preparation for my contribution to the Bill. I can tell Deputy McDowell that the morale in the ICC is as high as it could possibly be. They are very excited by the direction in which the bank is going and by the possibility of its future sale or takeover and development.

Deputy McDowell accepted that the turbulence in the financial sector generally and in shares was part of the reason for the failed sale of the bank. This sort of turbulence occurs. At present, there is turbulence in the technology sector where the share price of many technology stocks have fallen by about 90% over the past few months.

The Deputy asked why, if that turbulence took place so long ago, the sale has not taken place in the meantime.

Mr. McDowell:

That is not what I said.

Mr. Ardagh:

That is what came across to me and it contradicts what the Deputy—

Mr. McDowell:

I do not wish to be argumentative but what I said was that nothing has changed since. Financial stocks are still as low, there is greater competitiveness, and profitability in the sector is lower than it was a year ago. I said that nothing has changed since a year ago.

Mr. Ardagh:

The Deputy says nothing has changed. He complains the Government cannot sell the bank or do anything with it while at the same time putting forward a motion that the bank should remain in State hands. He cannot have it both ways. He cannot give out about the failure of the Government to sell or deal with the bank while at the same time saying the State should not do it.

On the question of State ownership and the strategic State role of the bank, even Deputy McDowell will understand that a small bank such as the ICC will not work in the times in which we live. The products and services the bank has to offer are insufficient to keep the business customers it has at the leading edge or fully satisfied given the financial products available generally in the marketplace. To develop, the ICC must find a larger partner in whatever way it can.

On the question of the ESOT, as opposed to an ESOP, I understand from my conversations with staff members that they are delighted with it. They will have to fund a share of about 9%. I have a problem with ESOTs generally because I find that all the shares are put together and a cosy board position is created either for someone from the trade union movement or a member of the Labour Party approaching retirement.

On the question of the capital requirement, the bank is definitely growing significantly and it is well acknowledged. In the first six months of this year, profits have increased by 64% to £18 million. Although figures are not given, there is no reason to believe that the trend will not continue. Advances to customers are around the £2 billion mark and the company has reduced its costs to income ratio. It has significantly increased the earnings per share and the dividends it pays to the State have increased dramatically. The amount of tax it paid last year increased to about £4.7 million. The bank is growing, but it cannot do so on a base of £40 million capital. As Deputy Noonan stated, £38.5 million is being used so it needs topping up, and I am delighted to see it is being topped up to £80 million in this Bill.

The enabling provision for the sale is necessary for the bank to be able to operate and I am delighted the Minister stated that, on Committee Stage, he will bring forward an amendment which will mean that any sale will go through on agreement of a motion in the House. Lending to customers was £1.4 billion in 1998 and increased to £2 billion this year. That is an increase of about 40% and is a significant one in two years.

As regards privatisation, contrary to Deputy McDowell, I believe the ICC would die in the long-term if it did not have the type of scale needed in the current financial climate. It needs to be able to access new products for all its customers. Given its size, it needs a larger market in which to sell any new products it develops and to be competitive. It also needs the international stage to obtain the financial backing to ensure it becomes a major player. The Irish market is not sufficiently large to contain a bank such as this which is open to development and increasing in size.

On the question of venture capital, I remember 30 years ago the ICC gave loans to companies and took a small equity in them, not because it was greedy but to give a helping hand and strengthen management controls so that customers would benefit from the expertise and discipline placed on those companies. The ICC did that well at the time and it has developed its venture capital to such a stage that it is now the market leader in venture capital in the software and technology sectors.

It has done so well in the management of those sectors that significant funds have been generated. A £100 million fund has already been taken up and another £100 million fund will go to market shortly. Some £20 million to £30 million was invested by the ICC in small software technology companies in the past year. For this the ICC takes minority stakes of between 10% and 30% with a view to getting a capital gain on those stakes along with helping the companies in which it invests to develop and prosper. As regards equipment leasing and asset financing, the staff of the ICC are exemplary in that they knock on doors, hunt down customers and help them to get business.

I pay tribute to the people involved. The chairman of the ICC, Phil Flynn, is doing a superb job. He came up from the unions. He has done a marvellous job in any position he has had recently, be it conciliator in trade union talks or labour relations and certainly as chairman of ICC Bank. I pay tribute to his work.

I support the Bill. The ICC managed the European Investment Bank funds in the 1970s for the Government. It was a partner in the early 1990s managing the interest subsidy loans. It is not that long ago that interest rates were going through the roof. It is easy to forget that, given the current low interest rates. Even if it sells it, I look forward to the State continuing to have a good relationship with the ICC Bank.

Mr. Wright:

I should state my interest in this at the outset, as I have been a client of ICC Bank for more than 25 years. One of the luckiest breaks I got in my earlier days in business was probably the fact that, while a local branch of another bank was unable to see the merit of a proposal I had, I secured the loan from ICC and at a much more competitive rate.

The morale of the company has been spoken about. However, it is my strong view that every aspect of the company, including the board, management and staff, is in very good shape. Most people are looking forward in a very positive way to this Bill being passed and the future development of the company.

ICC has been one of the few continually profitable semi-State bodies over the years, along with Aer Rianta, which is in my area. It has not been given the credit it deserves for its part in the pro motion of small and medium size enterprises over the past 30 or 40 years. It has been one of the leading factors in the promotion of small businesses. It has moved with the economy and has been very much to the forefront in the success stories of many of the excellent small and medium sized companies in the software, technology and telecommunications areas. It has also successfully brought many companies to the stock exchange.

My colleague mentioned the venture capital arm of the company. That is probably one of the most important aspects of the strength and growth of the company and illustrates the importance of what the Bill is trying to achieve, in terms of the added funding that is being made available.

The success of ICC Bank has been overshadowed by developments in worldwide banking, where banks have tended to become larger to provide protective financing at a competitive rate. If the bank is to go forward, as the board proposes, to compete in the financial markets, it may need to be strengthened by the addition of a partner.

The success of the economy over the past number of years has meant that ICC Bank's lending has increased threefold over the past six years. However, it is important to remember that, as Deputy Ardagh said, years ago when the economy was in a very different state, many companies were in serious trouble in relation to interest rates and the lack of available funding. The interest subsidy loans, which were proposed by the then Government and implemented by ICC, saved many jobs. As the economy grows, the changes made in section 3, providing for the allocation of extra funding, will allow ICC to compete and promote many of the companies in our economy that are looking for funding.

I believe strongly in the employee share option plan. Such plans have been a success in our economy and in many of the companies where they have been introduced. I am pleased the Minister told us today that this was agreed by the staff and management on 9 October.

If a suitable partner emerges for the company, the expertise at board, management and staff level that has been spoken about today will be very much to the forefront in promoting a new company and ensuring it plays a major role in financing our economy.

I also welcome the fact that the Minister of State, Deputy Cullen, said he will table an amendment to section 4 on Committee Stage, following concerns raised by the Opposition, which will provide that a disposal of any shares, other than those for the employee scheme, will require a motion of approval from the House. It is important that that will be dealt with on Committee Stage.

The movement of Irish industry into the computer hardware and software development sphere and telecommunications has been underwritten by many investments by ICC through its own ven ture capital and other software funds that it manages for many pension funds. Over the next number of years, there will be rapid changes in the relationship between customers and banks, with greater partnership orientated banking, through the use of venture capital seed finance, rather than traditional loan finance. We will also see a greater influence of external banks in the Irish market, especially in asset financing and new product development.

Over the next number of years, we will see the development of indigenous small companies, tied into the technology of the major telecommunications companies coming into Ireland. In my constituency of Dublin North, there have been announcements by major companies coming into Ireland. The production and development of their products in this country will lead to many opportunities for indigenous companies.

I support the Bill. ICC has been a great success story but it has not been given the credit it deserves in many areas. It has been very important in the development of many of the smaller companies in our economy, which has led to the creation of many jobs. The expertise in the company will survive any changes in the international market, depending on what proposal comes forward from the board and agreed by the House at the appropriate time.

Mr. U. Burke:

I welcome the opportunity to speak on the Bill. Before we deal with the provisions of the Bill, especially those dealing with increasing the share capital of ICC and preparing it for sale, it is important to acknowledge the contribution ICC has made to the development of industry in this country over the years. As many previous speakers said, at many times in the past when other lending institutions did not have the confidence to support certain proposed ventures, ICC stepped in and supported those ventures at very keen rates.

There has been a change in the type of support in which ICC is now involved, particularly the funding of tourism projects, transport and the communications sector. One of the newest areas in which it is now involved is renewable energy sources projects. As we approach budget time, I ask the Minister for Finance to look at this sector. It is very welcome that ICC has acknowledged the growth potential of renewable energy, particularly wind energy, and its benefits for the economy and the environment. Individual private landowners in an area with the capacity to develop wind energy could only get finance, support and guidance from a continental organisation. However, the ICC now supports this important growth area and, no doubt because of the market potential, it is on a winner and has recognised that. Would that other lending institutions would do likewise and support small farmers living in disadvantaged areas who see the potential in this area. Will the Minister and the Minister for Finance level the playing pitch in the forthcoming budget for such capital and personal investment? I hope they will respond positively. It is important that the State recognises the significance of developing this area and gives support by way of tax incentives or otherwise to the development of alternative energy.

It is obvious that any lending institution that has invested in communications, as has the ICC, was guaranteed tremendous returns over the past number of years. Perhaps that is why there is such significant growth in its investments and growth profits. There is a great turnover in that area. I acknowledge the part played by the ICC in supporting small industry in the past when other institutions did not want to go down that road.

This legislation prepares the bank for sale. When the ICC, TSB and ACC were previously offered for sale nobody wanted to buy them. There were four buyers in the case of ICC initially and then it was whittled down to one, the Bank of Ireland, which withdrew at the last moment. There is an acknowledgement that they were offered for sale in a hasty and unprepared fashion. However, under this legislation the ICC will be prepared for sale. It was mentioned at a meeting of the Oireachtas Committee on Finance and General Affairs that it would be two years before the ICC would be sold. Either Mr. Quinn or Mr. Flynn stated that. Will the Minister say why in the view of the executive and management of the bank it will take so long, particularly as this legislation has been introduced?

Just as in the case of the ACC and TSB it is important that the new purchaser continues the policies of the ICC. I do not know if the Minister will have an input to that but it is important that acquisition of ICC does not lead to a sea change in policy. If there were, it would be a retrograde step particularly for those who recognise the contribution and support given by ICC in a unique way to its clients. I hope there will be some safeguards for its customers.

It is envisaged that £100,000 per employee would be the net proposed income as a result of the offer to them in relation to share capital. It is obvious that employees would seriously consider the award and value of such shares. Is this being done to get their support? If that is the carrot, what is the other side? There will be changes in work practices, extended working hours to regularise them with the banking hours of similar lending institutions and so on. There must be give and take but was this incentive introduced solely for the purpose of getting employees to accept the possibility of a new owner? There was a doubt in the minds of many employees of this and the other banks about their future employment conditions if the banks were sold. In many towns the ACC, TSB and ICC operate side by side in prominent locations. It was obvious that if they merged some employees would have to take redundancy packages. If we are offering the ICC for sale again, which we are preparing to do under this legislation, I hope safeguards will be provided with regard to conditions and continuation of employment.

Deputy Ardagh pointed out that the ICC is a small bank. Although there is a growth in lending and profits over the past two years, we are saying it is too small to continue in its present form. Perhaps the Minister will comment on that. The bank is highly profitable with £18 million profits in the six months to last April and is enjoying huge growth with a 24% growth in lending. These are positive indicators of an organisation that is working well and has a future. It also has the potential to secure more customers. Despite those indicators it is still said that the bank must be prepared for sale. Are we going in the wrong direction? Are we just sprucing it up for somebody else to reap the benefit? That is my only reservation in this instance. It would be different if the bank were ailing and needed constant support from Government. However, it can stand alone. It has shown that it is profitable and can expand, yet we still choose to off load it.

I will support the Bill. I again acknowledge the contribution the ICC has made in a particular sector of the economy. That sector will always be there and it would be unfortunate for industrial growth if the sale of ICC to a concern such as the Bank of Ireland, if it does renew its interest, will mean there will no longer be the same level of support.

Mr. M. Kitt:

I wish to share my time with Deputy Kelleher.

An Leas-Cheann Comhairle:

Is that agreed? Agreed.

Mr. M. Kitt:

I am glad to have the opportunity to contribute to this debate. I compliment the Minister of State and welcome the proposals in this legislation. I have always been a strong supporter of the ICC Bank. I saw the good work it did in the west of Ireland helping small and medium enterprises at a time when such industrialists found it difficult to get help. Preferential loans and other products were available as a package to people in industry.

My only criticism of the ICC was that people in the west of Ireland had to travel to Limerick to conduct their business with the bank. At the time the bank only had branches in Dublin, Cork and Limerick. The Galway branch was opened in 1992 and the Waterford and Belfast branches opened later. It was a small but good network. The commercial loans and savings it offered were good for industry. We tend to forget that interest rates were high but competitive preferential rates were always available from ICC. That was of great benefit.

It was a welcome day for the west of Ireland when the Galway office of ICC was opened in 1992. Subsequently, other regions saw the great benefit of dealing with ICC. It is a little ironic that the final bidder for ICC, the Bank of Ireland, and other commercial banks are withdrawing their branches from smaller towns when ICC is doing more business with industry in those areas. Bank of Ireland has announced that from next Monday it will restrict the cashing of cheques in its branches. In a way the commercial banks are forcing people to open accounts. I say that in passing because I intend to discuss the Bank of Ireland later.

The House has previously discussed the question of disposing of the State's interest in ICC. It was decided to do that in July 1998. At that time up to ten banks expressed an interest in acquiring the bank but only three firm indications of interest were received by the closing date in August 1999. One of those banks, National Australia Bank, withdrew from the process and two banks remained. They carried out the preliminary due diligence exercise and met key management and union officials. When the Irish Intercontinental Bank withdrew there was one remaining bid from the Bank of Ireland which was received on the final deadline, 19 October 1999. That bid was less than the top range of the earlier indicative bids. It was no surprise, therefore, that a decision to withdraw the ICC Bank from the market might be required. We discussed that during the debate on the ICC Bank Bill, 1999.

Bank of Ireland made it known to the Minister in December 1999 that it no longer wished to proceed with the acquisition. It acknowledged the strength of ICC Bank in its specialist market but it felt that acquiring the bank was not the best way to develop its SME lending business. The Minister withdrew ICC Bank from the market.

I am glad the Minister made it clear that it is his intention to ensure that the bank remains adequately capitalised while it is under State ownership. The authorised share capital was last changed in 1997 when it was increased to £40 million from £12 million, a figure that was set in 1971. Between 1997 and 1999 total assets of the bank increased by 53% to more than £2.4 billion. Banking is a capital intensive business and the Minister has had to waive the last two dividends to boost the bank's shareholder funds. This allowed the bank to continue growing, a fact that is reflected in the excellent interim results for 2000 with profits of £18.3 million, representing an increase of 64% on the same period in 1999.

The Minister spoke about another provision in the Bill which relates to the question of looking at all the options for a change in ownership. There were enabling provisions in the ICC Bank Bill, 1999, but there is an initial provision in this Bill requiring the Minister for Finance to seek a motion of approval prior to making any disposal of his shares. It is right and proper that the House should have the opportunity to consider the matter at the appropriate time. It is also important that we ensure the capital arrangements are put in place now.

The ICC Bank has been a great success story. It has provided great support for indigenous industry. I am glad, therefore, that it is to be put on a good footing.

I would like to pay tribute to the management and staff of ICC Bank. I know the staff and management of the Galway branch which was set up in 1992. I hope their work will lead to continued profits and success for ICC Bank. I again welcome what has been announced in this legislation and thank the Minister for bringing this Bill forward.

Mr. Kelleher:

I welcome the opportunity to speak about ICC Bank. In assessing the success of ICC Bank, it is important to look not just at the bank itself but at its contribution to the development of Ireland in the 1970s and 1980s, particularly in relation to small and medium-sized business. The traditional banks were very conservative in their approach to providing venture and seed capital to small and medium-sized business breaking into areas of industry that were heretofore new to this country, particularly telecommunications, software and other forms of e-commerce. ICC Bank's contribution to developing that type of market has been beneficial to the economy at large.

Last year the Bank of Ireland expressed an interest in purchasing ICC Bank. It carried out a due diligence exercise but later indicated that it would not be proceeding. From the outside that might have looked as if there was a problem with ICC. I believe, however, that the problem was within the financial sector. Financial stocks had dropped. New banks were entering the Irish market. The opening up of the market and the entry of the Bank of Scotland meant competition. That was new to the Irish banking scene. Rather than there being a problem with ICC Bank, there was a problem with the traditional banks who were unsure where they were going and how they could address the more competitive market that heretofore had not existed in our economy.

I have always been concerned that lack of competition among lending institutions has stymied the development of our economy. We have two large banks – AIB and Bank of Ireland. These have not been proactive enough. They have not been brave enough in embracing new types of development or in providing capital to small and medium-sized companies entering unknown territory. But for ICC Bank, many very successful companies, innovative and very profitable companies that grew to be publicly quoted companies, would not have developed.

ICC Bank should be sold off to grow and develop. At the very least, it needs a partner, because of the competitive nature of and changes within the whole banking sector here. It has proved itself a success. It is well managed by the board, the management and the staff, which comprise a very dedicated group of people. The level of expertise it possesses would be of great benefit to any larger institution that wishes to purchase ICC Bank.

If ICC Bank is to be sold, there are one or two things I would like to see encompassed in any agreement. For example, in the event of a downturn in the economy or of the Government having to bring forward a scheme along the lines of the interest subsidy loan or a venture capital scheme, or in the event of a further take-off in the economy resulting in small and medium-sized businesses having difficulty getting access to funding, there should be some mechanism in place whereby the apparatus that is ICC Bank could still be used for such schemes after it has been taken over by another institution. It is something that might never arise. However, it would not cost anything to ensure the goodwill of whoever purchases this bank in giving a guarantee that if ever the Government required its services in bringing forward a scheme to encourage further growth and development of small and medium-sized businesses they would be, at the very least, co-operative. I would be concerned if that was not part of any sale, and it would not affect the price we hope to achieve for the bank.

The fact that ICC Bank was not sold last year was due more to the downturn in financial stocks and the concerns of the larger financial institutions than to problems within ICC Bank. The Minister has in the interim included in this Bill a provision for an increase of share capital from £40-£80 million. This gives the bank scope and opportunity because, over the last five or six years, it has achieved remarkable success, even against a backdrop of uncertainty. There has been talk for some time of selling off some of the family jewels and it was intended from an early stage that ICC Bank was one of the institutions that would be sold off. From that point of view, it has done remarkably well against that backdrop of uncertainty. Its profits and the increase in its capital assets is an indication of that. It is an indication also of the excellence of its staff and the expertise it has built up over many years. Deputy Kitt referred to the fact that the bank opened up branches in Waterford, Galway and Belfast in that interim period. This shows that there was confidence in the bank. Anybody looking to purchase ICC Bank would have to acknowledge that even against a backdrop of uncertainty it was able to perform.

There is one thing the Minister might clarify. Given that ICC Bank is a publicly quoted company, has there ever been any trading on the market of ICC Bank stock? If not, why? It baffles me that if ICC Bank is a publicly quoted company there would never have been trade in ICC stocks.

This Bill is preparing ICC Bank for sale. I certainly hope prospective purchasers know how much it is worth. I would be concerned if only one bidder conducted a due diligence exercise and subsequently did not offer what we would consider a fair price for ICC Bank. It is important that ICC Bank should be marketed well and its strong points highlighted at every opportunity. Members of this House have an opportunity to do likewise today and point out how great a benefit is the wealth of expertise that has been built up in ICC Bank. In buying this bank, a buyer is not just buying bricks and mortar but a wealth of expertise in areas that other banks are only now realising. In the dark old days of the 1970s, 1980s and even the early 1990s, ICC Bank was at the cutting edge, looking at innovative companies and new forms of development. Reference was made earlier to wind energy. ICC Bank was looking at this as an opportunity. In the 1980s it was looking at software and e-commerce. It has always been to the fore. If that were to be lost, I would regret that very much. I hope that whoever purchases this bank will allow it a certain amount of autonomy to continue in a focused manner what it is best at, that is, providing capital to small and medium-sized business and start-up business where it sees potential that other banks and lending institutions frequently fail to recognise.

As I said on a Second Stage debate in 1999, I would have a difficulty in selling a State owned bank to a company that does not have a tax clearance certificate. That is an important marker to put down. A publican when renewing his licence must have a tax clearance certificate. We must ensure that requirement is rigidly enforced when selling any State asset. The people own this bank. With regard to people who renage on their duties or are not co-operative in paying their fair share of tax, they should first and foremost have a tax clearance certificate from the Revenue. An inquiry has been held and most of the banks have settled with the Revenue. If any bank is interested in purchasing the ICC, even if it is offering top dollar, as a point of principle, we should not negotiate until such time as it has made a full and final settlement with the Revenue Commissioners.

I thank the staff of ICC, the management and the board for many years of excellent service they have provided and the contribution they have made to creating the Celtic tiger, particularly in the areas of e-commerce, software and many of the innovative developments for which Ireland is now renowned. We owe a great deal of gratitude to the management, board and the staff of the ICC for their years of service. I hope their share option scheme will go well and that the staff will become wealthy from the sale of the bank.

Mr. Connaughton:

I am pleased to have this opportunity to speak on the Bill, as this is the first time I have spoken on the ICC, although I have had an interest in it for the past 20 years. I agree with a great deal of what Deputy Kelleher said. The debate on the Bill gives us an opportunity to reflect on the role the ICC has played and can play in our industrial development. One of the hallmarks of a rapidly expanding economy is that old friends are often easily forgotten. I am not sure whether reflecting on history is good or bad, but I remember times in the 1970s and 1980s when people with great enterprise and flair, who had put every single penny of their disposable income into enterprises, were not helped by the big banks. Those people put their case to the big banks, but from the banking perspective the return on their enterprise was not considered satisfactory and those enterprising individuals had to look elsewhere. While that was not always the case, it happened on many occasions. I remember that for many people to whom I tried to give a hand, the same as many other Members, it was the ICC that came up trumps. The ICC never acted in a lame dog capacity. It was not a St. Vincent de Paul outfit, as one cannot run a bank on that basis.

The ICC had an ethos, which was not to be found in the bank fraternity until recently, although if there was a downturn in the economy I am not sure if that ethos would exist. The ICC's ethos was one of genuine help and interest. That ethos is terribly important in the banking sector and it is also found in the credit unions. While our big banks are doing extremely well and it is important for our economy that they do well, it is also important to understand there are niche markets, and ICC was in one of them. I am wise enough to understand that this Bill is a preparation for another resale or attempt at reselling or refloating ICC. I do not consider there is anything wrong with that, as I assume that if it is left the way it is it will be outflanked by the major banks, particularly if our economy keeps pressing ahead. It would be preferable if the ICC got a partner with an ethos compatible to its own or if is subsumed into a much bigger outfit ICC's ethos would shine through, in other words, that the ICC under a new banner would be good at doing what it is currently good at doing.

I understand fully that in the big bad world of sales and commercial activity if one puts a burden on a title, as in the case of a house, it is difficult to get a buyer. If and when ICC is offered for sale or a partnership arrangement is agreed a burden should not be placed on it. Given the State's involvement in ICC, it would be remiss of us if we did not put down a marker that there should not be a legal burden on that asset, but we must realise that the commercial environment is such that a purchaser will not touch ICC unless there is money in it for that purchaser. There is a niche market for those enterprising young and not so young people. The effort they must make is pure torture. While I am not a businessman, I have been associated with many businesses over the years. If one wants to stay up at night, one should try starting a small business. It is nearly as bad as politics, maybe it is worse.

Éamon Ó Cuív:

Maybe worse.

Mr. Connaughton:

It is unbelievable what such people go through. I speak on their behalf. They and their families put in untold hours of work and experience great anxiety for years and years before some of those projects get off the ground. I know of such people who have been struggling for years. We all know those who have been successful. Their names are on the tips of our tongues. For every successful entrepreneur, there are five or six struggling and five or six more who have gone under. While there are a multiplicity of reasons a project works or fails, it is important to note that a helping hand at the right time is extremely beneficial. One of the reasons for the continued progress of the credit union movement is its ethos of giving a helpful hand when people require it. The same principle applies to enterprise. If one thought that one's gale day had come up for the repayment of one's loan, a hallmark of ICC was that it would say it trusted one, it had confidence in what one was doing and it would change the date of repayment or reorganise the repayments. The ICC operated in a humane yet businesslike way. It was not in the business of writing off debts and anyone who checks its portfolio will realise that. Much of the success in industrial terms of small and medium sized enterprises – and not so small enterprises – in the 1970s and 1980s was due to the helping hand and culture of understanding found in the ICC. For that we owe it a great deal of gratitude. I hope that will not be lost to the nation, irrespective of who buys it. I assume there will be some compatibility in terms of the purchaser who will want to buy the ICC and with what that purchaser will want this arm of its business to do in the future. That is why we should not sell ICC just for the sake of selling it. There was a debacle last time and though I am not privy to what happened, whatever happened was a mess and was no credit to anyone. I do not know what happened and I am not sure if anyone else knows either. Suffice to say that the ethos regarding the business community in ICC remains – whoever takes it over. I assume that who ever buys or goes into partnership with ICC will be doing so for that reason. I do not see them dramatically changing what ICC was good at, because if they did a niche market would open up that would have to be filled by someone else, though I do not know who.

We speak glibly about entire capital but the problem with it is the ability to see the opportunity for a project to go ahead or not. The idea from the banker's point of view is to be good or lucky enough to spot a venture that will work so that one can be sure of getting one's money back. The problem for an individual is that his or her money is gone into the project also and often that money does not come back. That is the great argument in this area.

I have no problem with the sale of ICC. Other speakers have emphasised different aspects of the sale. We should move slowly and pick the partner as best we can but we must also get good value for the State's investment over the years. I have always felt that the administration and board of the ICC were always above board. It passed the litmus test on the DIRT issue; I understand it was not really involved which is important and to its eternal credit.

The ICC was to small industry what the ACC was to farming until recently. There was a parallel there until the big banks moved in on the agriculture industry. I always had a soft spot for the ACC because it helped out greatly over the years, but this situation is almost the same.

More than eyebrows were raised last year when the Bank of Scotland entered the market. There was a fair degree of scurrying by the bigger banks. There is still a monopoly in this area. The banks can talk about their various products and the competition but they are extraordinarily close to each other on charges. There is no great variety there – there may be a tweak here and there but they are taking branches out of small towns and villages all over the country and it does not matter which one of them is doing it. Against that, one should always have a bank like the ICC which has cut a niche out for itself in the world of industry.

It is important to a modern economy to have sound, well-financed banks. Some people may say they have inordinate profit levels but it is important they are sound. One must also remember in the context of ICC that most of the profits of our two major banks is generated outside this jurisdiction and that that is the way banking will go in the future.

I have little expertise in flotation on the stock exchange and what this means for bank staff. I find it hard to understand that as the shares are not traded as such there is very little activity in them. What does this mean for people who will get shares? I understand this deal has already been made.

The share capital ceiling is to be raised from £40 million to £80 million; I assume that is a technical matter and there is no reason to believe that in two weeks' time the £80 million barrier will be met. I understand it is expected to rise to no more than another £50 million. Obviously with the progress of the economy it is normal that this sort of thing would happen and nobody has a problem with that.

As previous speakers have said, various projects such as e-commerce are coming on stream while other projects came into being some years ago, such as the short-term small industry division of the IDA. Factories were being built in a great rush 20 years ago in an effort to get factories into every spot in the country but that all died away in the 1980s. We noticed that many of the enterprising people involved in the boards of those small industries found it quite difficult to get funding for both the projects they were in and locating them where they wanted. I hope the ICC will become involved in newer areas such as e-commerce and sustainable wind energy. Since taking up my new portfolio I have visited some wind farms around the country and there is no doubt about the need for huge capital input in this area, as five wind towers cost almost £4 million. That gives some indication of the kind of investment needed. I hope the ICC will be very involved in this and one hopes the Government attends to this in the upcoming budget. In fairness to this Government and its predecessor, I am led to believe by the wind energy sector that the legislation in place gives every opportunity to get into this but the problem is the high capital cost.

Everyone understands that wind energy is a green energy source, is a great import substitution and is a great alternative to greenhouse gas producers. So is wave energy, though we have not done as much with wave energy as we should. When one considers that there is hardly a day in Ireland when there is not a breeze of some kind along the west coast it is obvious that there is a good future for this industry. However, we must have the ability to fund it in such a way as to enable ordinary people with a business idea to be backed to the hilt in order that they can make a living out of it.

I welcome the Bill. I hope the reservations being sincerely expressed by so many Deputies will be taken into account when the ICC is being sold. The ICC played an important role in the country's industrial development, but it will do even greater things in the future once the right partner is found. The expertise developed by those employed by the ICC must be available to further boost our economy in the years ahead.

Mr. M. Ahern:

I welcome the opportunity to comment on the ICC in the context of the Bill. It is no harm, at this stage, to place on record some historical facts about the ICC. The bank was established in 1933 by the first Fianna Fáil Government which identified the need for—

Mr. Deenihan:

The legislation to establish it was prepared by the previous Administration.

Mr. M. Ahern:

—economic development in the country. The ICC was established to be a source of finance for indigenous industries at a time when money was flowing out of the country and into the London stock market and not being used to strengthen our economy. Through the establishment of the bank, funds were made available to allow people to establish businesses. Companies such as CRH, Newbridge Cutlery, the Irish Sugar Company and many others can thank the ICC for helping them to establish their operations and develop them over the years.

In the 1950s, 1960s, 1970s and 1980s, the commercial banks were not keen on providing finance to those with burgeoning businesses. It was left to the ICC in many instances to provide seed capital, working capital, etc., to people who wished to establish a business. In those days, the ICC was in a position to provide loans at interests rates lower than those on offer by the commercial banks because it was in a position to obtain funds from the World Bank and the European Investment Bank and benefited from support from the Department of Finance.

The ICC's function was to help people in establishing their businesses and to encourage the growth of indigenous industries, and it was successful in that regard. However, times have changed and the commercial banks are now in a position to provide loans at rates as low as those offered by the ICC. In that context, we must reconsider the raison d'être of the ICC and decide whether it should continue to operate as it did in the past.

The Minister for Finance reached the conclusion that the ICC should consider its position and, consequently, it was put up for sale. None of the ten interested parties, the last of which was the Bank of Ireland, decided to proceed with the purchase of the bank. The main reason the Bank of Ireland did not purchase the ICC was because the two operate in much the same market. In addition, the ICC had moved away from its initial mandate, namely, the provision of funding for those seeking to establish businesses. It moved away not out of choice but because times have changed. Much of the money it now lends goes into asset backed projects, the building industry and other businesses of that nature which are not involved primarily in job creation.

What percentage of the loans issued by the ICC goes towards the establishment of small and medium enterprises and what percentage is invested in asset backed projects? With regard to lending policy, does the bank comply in full with the Central Bank's guidelines on property lending? Perhaps the Minister will provide answers to those two questions in his reply.

The bank's financial performance has been extremely good. Any business which has shown a year-on-year profit from 1993 to the present has undoubtedly been a success. In recent years the bank's performance has been good. It doubled its 1995 profit of £12 million before tax to £25 million in the year up to October 1999. In the past six months, its half-year profit has increased by 64% to £18.3 million. That performance is not to be sneezed at.

Those responsible for managing the bank have performed exceptionally well in recent years. They have tightened up they way things are run and the profit margins have increased as a result. These people are doing an excellent job, particularly in light of the circumstances in which they currently find themselves. I referred earlier to the bank's original mandate and the changes made to it over the years. I intend no criticism of the current management because its members are doing an outstanding job and enhancing the bank's value. They encouraged the movement of the bank into the area of venture capital and it is now obtaining good returns in respect of the funds it has provided in that regard.

The bank's funding comes from commercial sources in the domestic and international markets. It raises its funds from the inter-bank market, domestic and international bank deposits, through syndicated loans, by deposits from financial companies, business introducers and from corporate and personal depositors. It has been successful in raising funds, lending them out and raising a profit margin on them. The management of the bank has done an excellent job.

The ICC has identified a niche in the market, namely, in the area of software investment, and it has two specialist software investment funds which have proved particularly profitable. For a small bank to be successful, it must concentrate on such niche areas and I compliment the management of the ICC on not sitting on its laurels. Its members have identified, pursued and been successful in grasping opportunities that have arisen.

Electronic commerce is growing at an enormous rate. The bank has foreseen the need to move with the times and it is becoming involved in the electronic banking area. I am delighted, however, that is has not lost sight of the necessity of having a personal relationship with its customers. As a small bank, its road to success must lie in having hands-on and personal contact with its customers. The bank sees this as a priority. Having discussed the matter with management, it will continue, even in this age of electronic banking, to maintain personal contact with its customers.

The question of DIRT was raised with the chief executive officer of the bank when he appeared before the Joint Committee on Finance and the Public Service recently. He confirmed that its DIRT liability was minimal. When one considers the large liabilities of other semi-State and private institutions, one is glad that the bank is operating a clean business and that its DIRT liability is next to nil.

Deputy Kelleher mentioned that whoever is in the market for purchasing the bank should be required to produce a tax clearance certificate. While this could only apply to Irish based institutions, I agree that if any of them expresses an interest, it should confirm that its tax affairs are in order. Applicants for grants and licences are already required to do this. The Minister of State should, therefore, ensure the tax affairs of any institution which is in the market for purchasing the bank are in order.

The Minister of State said that section 3 provides for an increase in the authorised share capital of the bank from its current limit of £40 million to £80 million. At a time when it is doing so well, it is important that it is not constricted by a lack of share capital. It is welcome to hear that it will have adequate share capital as long as it remains in State ownership.

I welcome the Minister of State's statement with regard to section 4. He indicated that following concerns raised by the Opposition there will be no disposal of shares without the matter first being put before the House. It is right and proper that there should be no sale of State property without Members on boths side of the House being given an opportunity to express their views. I, therefore, welcome the Minister of State's decision to introduce an amendment to section 4 on Committee Stage.

Where employees have a share in the ownership of a company, be it publicly or privately owned, they tend to see it as their own own and put in more and a better effort on its behalf. This is only natural. ESOPs have, therefore, proved to be a success. Where employees are of the view that a company belongs to them, they will see it as something to be improved and enhanced; otherwise, there is a danger that it will be ignored. I, therefore, agree with the employment share option programme in principle. While I agree that it may be used in a situation such as this as a sop to accept change, it should be enhanced and used in many organisations.

I welcome the Bill and compliment and congratulate the management of ICC Bank which has done a tremendous job down the years. Times have changed since the 1930s. The time has come to look at a new model. I wish the board, management and the Minister of State every success in finding the bank's proper niche in the market.

Mr. Deenihan:

I am glad to have the opportunity of contributing to the debate on the Bill. ICC Bank has made a major contribution to the economy since its establishment in 1933 under the Industrial Credit Act. It was a time, at the start of the economic war, when, generally, a protectionist attitude was adopted towards Irish industry and when we were still trying to come to terms with our new found independence and freedom. We had lost many entrepreneurs. Most of the big investors prior to the War of Independence had slowly moved out of the economy with the result that most of the available resources were in the hands of a small number of a very wealthy people. Most of the money was moved through the stock exchange in England. There was, therefore, a reason to establish the ICC Bank which has played a very significant role in Irish life since its establishment. It has a tremendous record. I recognise the contribution made by its management and staff over the years. I have always found the management and staff of my local branch to be very positive, co-operative and helpful and totally responsible in the decisions they make. That is the reason the bank has been successful.

In the early 1930s there was a distinct lack of industrial development. There were few manufacturing industries and no sources of long-term credit for industry. The funds available for investment were generally channelled through the London stock market. The ICC Bank was established to provide a means of redirecting this finance to create an industrial base in Ireland, initially by underwriting capital issues and providing medium and long-term capital for Irish manufacturing businesses. Its main objective is to provide a range of financial services for the business sectors of the economy while seeking to earn a satisfactory return on shareholders' funds. ICC Bank differs from the commercial banks in that its services are directed solely towards the business community, particularly small and medium sized enterprises. That the bank has shown a profit in each of the 66 years since it was established in 1933 reflects well upon its management and the responsible decision-making attitude adopted by staff.

This Bill will allow the Department of Finance to inject up to £15 million into ICC Bank and will enable the bank to be sold in the future. The failure of the previous bid to sell the bank resulted from a lack of preparation. The period prior to the sale was not properly handled and mistakes were made. Although we will see many semi-State companies being sold in the future, the process was new to many this time last year. This legislation should have been introduced prior to the previous attempt to sell the ICC in 1999. Had the proper preparation been made last year, there is no doubt that the company would have been a more attractive prospect for potential investors.

The bank's performance over the past year will make it even more attractive to investors at this stage. Irish companies, because of their size, lack a critical mass and require international partners. That is true of Aer Lingus and the former Telecom Éireann. Over the years, Kerry Group, with which I am well acquainted, expanded outside of Ireland because it was not possible to expand within the Irish market. I hope the bank will attract the interest of a strong international bank or consortium which has a worldwide established customer base. That may be a rather ambitious wish but, given the bank's expertise and record it will be an attractive prospect for an international buy-out. The bank may, on the other hand, be bought by the Bank of Ireland or some other Irish company. It is interesting to note that the recent bids for Eircom come from two Irish entrepreneurs. Mr. Denis O'Brien has indicated his desire to buy Eircom and it now appears that Mr. Tony O'Reilly is also interested in the company. There are Irish entrepreneurs and companies which have the strength and confidence to bid for banks such as the ICC.

Mr. Michael Quinn made a very good presentation to the Oireachtas Joint Committee on Finance and the Public Service some weeks ago on the up-to-date ICC position. He stated that this legislation would allow the bank to concentrate on the options available to it such as the possibility of a trade sale or a strategic alliance in the future.

ICC is currently allowed to lend approximately double its amount of authorised share capital. The injection of funds which will result from the passing of this legislation will allow it to lend on £80 million. That is a positive move and one which will place the bank in a much stronger position when it is put on the market. The ICC has continued to expand and its performance has continued to improve since 1999. In the six months to the end of April, profits were up 64% and the interim pre-tax profits of £18 million will allow the bank to increase lending by an additional £15 million to £20 million after tax and dividends.

The sharp rise in income generated in ICC Bank is one of the main causes in the substantial decline in its cost to income ratio from 47.1% to 35.8% over the six month period. The bank, whose income levels have increased at a much faster rate than its costs have reduced, is working to achieve greater efficiency from its existing cost base. A potential buyer will view positively the scale of the reduction in the cost to income ratio and it will be important for the bank to maintain its current levels over the remainder of the financial year.

The bank has increased its presence in the service industry sector and has also been active in funding projects in the area of renewable energy sources. The ICC is involved in the provision of seed capital to wind-farming enterprises. To digress for a moment, I saw a number of turbines being erected on the Stacks Mountains and in other parts of County Kerry. In future, we must consider the value of wind farming from the point of view of reducing greenhouse gas emissions but we must also consider its effect on our landscape. Turbines should not be erected in very scenic areas. Wind farming is a relatively new departure and, as such, local authorities may not be very au fait with them. I have seen a number of applications coming before Kerry County Council in this regard and have seen turbines being erected in areas in which they damage the landscape.

A book entitled Credit Where Credit is Due offers a valuable insight into the ICC's history. It states that in the ten years to October 1999, ICC's dividends and tax charge amounted to more than £60 million, a worthwhile contribution to the Exchequer. It further states that the growth of ICC's business during the 1990s is evidenced by the fact that its assets, which stood at slightly more than £1 billion in 1990, increased to almost £2.5 billion by 31 October 1999. That is a reflection on how well the ICC has performed over that period.

Deputies Connaughton, Burke and others referred to the role of the ICC after it has been sold. We are relatively new to the idea of venture capital, which has driven Silicon Valley and various developments in America, and have not sufficiently capitalised on its potential. We must create more of a venture capital culture, particularly in terms of remote and peripheral areas where it is very difficult to get local business to invest because of the economic base. It is important in terms of creating jobs in areas where it is difficult for the IDA to get mobile investment. In future the ICC will have to play a more significant role in terms of venture capital.

There are some financial experts in the House, but in general we perceive the ICC as a lending agency which helped set up small businesses in our localities and which we approached in terms of trying to help clients. We cannot predict with certainty what will happen in future in the event of a partner being found for ICC or of it being sold. There is a concern that the important role being fulfilled by the bank, which is not being provided by any other commercial bank, should continue. Deputy Kelleher made the very good point that in future, whatever the circumstances in which ICC will operate, these critical roles of providing seed and venture capital, etc., must be continued. It would be a major strength if ICC could attract a partner which had major connections in terms of venture capital.

Perhaps the Minister in his reply will expand upon the role of ICC in future in terms of its current focus. Will there be control in this regard or will the contribution of ICC since 1933 be diluted if it becomes part of an international organisation?

This is a very important debate for those of us trying to attract industry to our localities and who have connections in America, including Silicon Valley. Everyday we come up against problems in trying to lure and attract investors into remote places. One of the future means of attracting industry and getting investment is through venture capital, and I see a very important, strengthened and expanded role for ICC in this area, apart from its role in e-commerce and the other areas in which it is currently venturing. Perhaps in his reply the Minister could give us an overview of this aspect of ICC's role.

The strategy and vision of ICC was ably described by Deputy Quinn. Even if left on its own ICC will prosper in future because of its management and focus. We all agree that ICC should be sold – Fine Gael was perhaps the first party to suggest it. The idea was mooted in 1992, but there was an amount of opposition. We must be careful that the critical role played by ICC will in no way be diluted in future and that its significance in supporting so many of our SMEs will not be changed.

Mr. Barrett:

I would like to share time with Deputy Timmins.

I listened to the Minister's speech and am somewhat confused as to why this Bill is being brought forward at this stage, particularly given there is no indication as to whom the bank will be sold. We know the staff and management will secure a 14.9% stake in ICC, which I very much welcome. I note this is being done by way of 5% in return for change in the bank while 9.9% is being purchased. The performance of ICC over rercent years has resulted from good management and good staff. I have always been a fan of ESOPs and have supported the idea that staff, who create the wealth, deserve a stake in the company. I have no objections to the concept of the State surrendering 5% of its share and giving the staff the opportunity to purchase 9.9 %.

It is also important that we provide the opportunity for an increase in the authorised share capital of the bank. The bank is continuing to grow strongly and as long as it remains in public ownership the shareholder must provide the necessary share capital. The bank is performing a very important function in being to the forefront in providing venture capital, which is important for our type of economy and particularly for small and medium sized businesses which would per haps find it more difficult to get such capital from ICC's competitors. However, the Minister does not say who will replace the ICC in the provision of venture capital.

Ireland is not at a stage where it is self sufficient in terms of providing capital. Small and medium businesses still have to borrow money to expand and create employment. The way things are going, with everything becoming so big, there is no competition. There are two major banks and a couple of small banks, and it could be said that we will have one bank if we are to take an extreme viewpoint. Where is the competition? Government has a responsibility not only to achieve success for its shareholders, namely the people, but to ensure there is ongoing competition so people can get the capital necessary for development, particularly outside the major cities, which are choking.

The Opposition has achieved something by getting a commitment that the Minister would bring forward a motion for approval by the House before he sells any further shares. That can be done in bits and pieces. On the overall structure of the company, where it will be in five years' time, who will replace the type of business that it is concentrating on and which has grown enormously in the past ten years, as outlined by the Minister? Do we have a guarantee of onward competition in the banking industry so that people can get the capital needed to either expand an existing business or to create a new one? Let us look at what happened in the insurance industry, of which I know a little. A short time ago if one wanted a quotation for motor or house insurance there were numerous companies one could approach and get the best quotation. Every day of the week small insurance companies are bought over by large companies and there is less competition. I am interested in competition. Good competition is healthy whether in the banking or insurance industry.

Let us look at what is happening since Ireland joined the euro, a matter I raised at the Joint Committee on European Affairs when the Director of Consumer Affairs and the Banking Federation representatives appeared before the committee. Let us look at those changing Irish punts into pesetas or Austrian schillings as I did last week when I was travelling with the Ceann Comhairle. To illustrate what is happening I have two dockets here showing that for £100 worth of Austrian schillings I was charged a fee of 2.25% plus £2.50. We are supposed to be in the euro. Yet we have to pay 2.25% plus £2.50 to get Austrian schillings. We wonder why people are losing confidence in the euro We were told the only advantage of the euro would be that if all the countries joined and if you wished to take your money around the European Union you would not lose your money. On a small transaction the charge was 2.25% plus £2.50. The charge in the other docket is exactly the same.

I have some other statistics. Irish banks are charging the highest in Europe to change money within the euro zone. The reason for this is the lack of competition. If the two major banks here decided to close up shop tomorrow morning in some aspect of business, whether in property or whatever, there would be no competition. I do not have any ideological problems about selling off State assets. If it is good for the Irish people I will put up my hand and say I am in favour of it. As one who has been in business all my life I do not understanding the reason for selling assets that are continuing to grow and produce major profits. For what do we want to sell an asset? What will be done with the money? This is a bank that is providing a service particularly in the area of venture capital and competition, even though it may be small. I do not want to see what happened in the insurance industry taking place in the banking industry. Long established companies have gone out of existence. They have been bought out by large continental companies. This is fine in itself but is it good for the Irish consumer? Are we getting to a stage where if one wants to insure one's car one can approach two or three companies and they can set the rates? That is what happens when people are allowed buy up many smaller companies because there is no competition.

This is not about having an ideological problem about the sale of ICC but about knowing exactly where we are going with this company. We should learn from Eircom. It was floated off. Some percentages were sold to foreign telecoms, the public was asked to invest, and the State owns a part of it but the share price has gone to the floor. Thousands of people turned up at the recent AGM of the company. There is no long-term proposal as to how this company should develop. Will it be sold off completely? Will the State continue to be a part owner? This is all about confidence in a particular company. We should learn a lesson from that.

If we want to do something with ICC why can we not sell some of the shares to the ordinary person on the street but restrict the amounts one can purchase? It is fine to get staff and management involved. I understand that some 2% of ICC is owned privately. Why can we not decide to give the people a chance to invest in a successful bank? Nobody has explained why that cannot be done. If we are to pass legislation which authorises the Government to sell off a successful asset a proper plan should be debated in the House because we are here representing the ordinary shareholder. We are here as the people's voice in respect of an asset they hold. People will say a good price can be got for this bank today. That is fine, the money will go into the State coffers. Perhaps it can be used to further eliminate the debt and maybe that is the right thing to do but that is a decision that should be taken. What is the alternative? Where will this bank be in five or ten years' time if left as it is? If some of the shares were sold to the staff and management where do the professionals say the bank is likely to be? Will it be weakened and unable to compete?

Let us look at what is happening to interest rates. Many people who have a pension lump sum want to leave their money on deposit for the rainy day but the deposit interest rate offered by the major banks is outrageous while some of the smaller banks offer 2 percentage points higher than the major banks. It is good that these banks are here and will look for money. Because of the type of business in which they are engaged they are prepared to offer a higher rate than the major banks.

I will not vote against the legislation because of my party's position on this matter. However, I still believe, before any motion is brought before this House for the sell off of any shares in this company, we should get a professional report outlining clearly to us as legislators what in their opinion is the likely future of this bank if no change takes place other than selling off some of the shares to staff and management, about which I have no problem. That is the right approach. When it comes to Committee Stage the Minister should frame an amendment to put into legislation certain commitments about a detailed report and so on. Perhaps this is unusual in legislation but it is unusual to sell off a very successful State asset that is growing and continuing to grow and, above all, is providing competition and venture capital which may not be available from the other banks. Because of its unique position and the manner in which it has grown over the past ten years, we deserve something better than just passing legislation which will allow any future Government to decide the matter. The House should receive a comprehensive report as to what the professionals think the future of the bank will be under options, one, two, three and four.

Mr. Timmins:

I thank Deputy Barrett for sharing his time with me. I do not disagree with the principle of selling State assets, but I have concerns about competition. Will we look back in a few years and saying "Hey, we shouldn't have let this go"? We are all familiar with the phrase "the country is awash with money and there is loads of money for every project". All the politicians use that phrase which one hears on every radio programme. To use an old adage, it might be better to teach people how to fish instead of giving them fish. Much money is thrown at various projects whose viability I would question. Is this the correct approach to take? As sure as night follows day, there will be a time of want. In a few years time we will look back at various tranches of funding that were given to certain schemes and projects that should not have been given. For the sake of political expediency or an easy life, however, such funds are being allocated as a short-term solution, rather than addressing the causes of dissatisfaction. While it is almost certain that the ICC Bank will be sold, I would not like to see the money raised by its sale going towards short-term solutions.

Irish banks are highly profitable and that fact reflects the general state of the economy. The banking sector is undergoing change and the main driving forces for such change are globalisation and deregulation. It is hard to persuade people to switch from their bank or insurance company. People are reluctant to switch and they do not shop around. They get their insurance renewal forms in the post, but rather than ringing around for a lower premium, they will simply renew them. I am sure Deputy Barrett is glad that is the case in some instances, but it is important to shop around. I hope the globalisation of banking will assist competition. Advances in information technology have played a big part in the evolution of the banking system.

The Bill is preparing ICC for sale and this situation is inevitable in many respects as many banking and other business groups strive to rationalise their costs. I welcome the ESOP principle which will have to evolve though many facets of life, particularly when people seek higher wages or more time off. We should examine the principle in various strands of the Civil Service where it is difficult to recruit people to fill vacancies. Public sector employees feel they are being left behind the private sector, but the ESOP principle will make staff in semi-State companies feel they are part of something and, in addition, it will maintain restraints on wages.

Banks are an easy target on which all of us can vent our anger. While one is always careful not to attack anyone or anything without good reason, one can have a go at banks without fear of running into difficulties. Part of the reason for this is that banks have abused their position over many years. In the past, most people entered banks in terror and with a subservient attitude. The banks had a position similar to that of the church or the legal profession. Customers felt the bank manager was doing them a big favour if he granted a loan or other facility, when in fact the customer was keeping the manager in business. Luckily enough, that wall has crumbled with the evolution of society. Banks now realise they must also evolve. Many branches of big banks have made contributions in areas, for example, through sponsorship of local events.

In 1998 the banks spent £1.8 billion in the economy, and they provide more than 30,000 jobs. An important function is to facilitate the interaction between those with surplus funds and those seeking funds. The ICC has played an important role in facilitating small business investors. I admire those who take a chance in the business world. It is easy to flash by a place and say "God, such and such a business is going very well. He is making great money". However, a person must put his neck on the line to enter the business arena. Business has received a bad press from politicians in recent years. I do not know how many times I have heard people say that big business and politics should not mix. However, innovative business is the life-blood of the economy in contributing taxes and creating employment. It is important to realise that without such business enterprise we would not have the economy as it is. People, therefore, should stand up for the business sector and applaud the fact that business people are willing to put their necks on the line and take a chance.

Banking commenced in Ireland in the 1600s, with the branch concept arriving in the 1820s. Traditionally, while people were subservient to the banks, they placed great trust in them and did not see them as doing anything wrong. Phrases such as "Safe as the Bank of England", or "Safe as a bank", were commonly used.

I am concerned about the banks' approach towards lending money for house purchases. Every other day people receive letters in the post asking them to sign on the dotted line to obtain £10,000. One hardly has to put one's address on the application form. Money is being given out too cheaply, however, and someone will have to pick up the pieces.

In recent weeks I have received anecdotal evidence about the repossession of cars. Last weekend, someone told me to go to a certain garage to see how the owner is having difficulty in parking the vehicles that have been repossessed. Each January and February we see young people with mobile phones flashing around in newly registered cars that cost at least £10,000 or £12,000 each. The main banks should publicly state what the position is concerning the repossession of cars so that others can be warned. Are the figures higher than before and are people running into difficulties? Many people think there is no payback because money is so easy to come by, everyone is having a good time and we are all on a tidal wave.

In the recent past, I raised with the Minister the question of bank drafts. Elderly people in rural areas have traditionally put their money in a shoe box under the bed. Those who were a bit more advanced, however, took out a banker's draft. I have the impression that many people took out banker's drafts as a form of keeping money safely, but they may have passed away and so the draft has not been drawn down. Banks have a record of such transactions. My understanding is that if someone dies without making a will, the person seeking probate contacts the banking institutions, but does not check all the banking records, only current and deposit accounts. I am confident a great deal of money is lying in banks which has not been drawn down by people or by their next of kin. There is an onus on the banks, particularly the two main banks, to go thorough their banker's draft records and try to contact the next of kin concerned. I hope the Minister's officials will convey this to the Minister. I have mentioned this matter in the past but, since the Minister is a busy man, I do not think the point I am making has hit home. In addition, people who have illegal money have used this system. We hear anecdotal evidence of what is happening but I do not intend to go into that. It is important for us to examine this matter and introduce legislation requiring banks to inform draft holders after a certain period that there is a time limit on the draft. Hundreds of vulnerable, poor people do not have access to money which is rightfully due to them as the next of kin, because the banks have held on to it.

Other speakers have mentioned tax clearance certificates. If a local builder places a tender for an extension to a council house, he must have a tax clearance certificate. If one of the major banks is to purchase the ICC, it is important that it be required to produce a tax clearance certificate.

I remind the Minister of State about the concept of the banker's draft. It is something which should be examined in conjunction with dormant accounts.

Mr. Higgins

(Dublin West): The Bill is being introduced under false pretences. The Minister of State turns his eyes up to heaven as I say that and says “Here he goes again”.

Mr. Cullen:

The Bill is supported by the staff.

Mr. Higgins

(Dublin West): I will explain exactly what the Government is about in introducing the Bill. The explanatory memorandum states that the purpose of the Bill is to increase the authorised share capital of ICC Bank from £40 million to £80 million. That is all very well, but the real reason for the Bill is in section 4 which states that the Minister may sell, exchange, transfer or otherwise dispose of any or all the shares held by him in the ICC. The privatisation of ICC Bank is what the Government is about and is the real reason the Bill is being brought before the Dáil.

The Government wishes to hand over to financial moguls, be they Irish based or internationally based, yet another asset which properly belongs to the people. Privatisation mania dominates the thinking and actions of the Government on an almost weekly basis. What we have is a Government that is drunk on current growth rates in the economy and which is intoxicated with the philosophy of free-booting, free market capitalism and the greed for the purchase of State assets by powerful interests who want to lay their hands on them. The Government is greedy for the funds brought in in the short-term by privatisation and sell offs.

The Government now has a tunnel vision as far as our State assets are concerned. No more is it a question of developing assets and companies in State ownership and the services State owned companies can give the people, rather how a quick buck can be turned by the sale of these invaluable assets and handing them over to the Government's friends in private enterprise, the people who fund the Fianna Fáil and Progressive Democrat parties.

This philosophy, this privatisation mania, will have disastrous consequences in this State in years ahead. It removes increasing amounts of control from the people in the imperfect form of State-owned companies and places those companies in the hands of those who feel no responsibility for the well-being of the people, for social solidarity or for the concepts of full employment and social harmony for working class people, working people and marginalised people. Privatisation is about giving control to private capitalists based here or in the form of multi-national companies. In doing so, the Government is also throwing the fate of thousands of employees at the mercy of those who buy up State assets and who do not have a commitment to maintaining the full complement of those employees into the indefinite future.

The privatisation decisions of the Government, the philosophy which underlines them and the decisions made accordingly by the Government are based on the economic record of recent years and the extraordinarily high growth rates which have obtained in this economy. The Government's head has been turned by this experience to the extent that it now believes this level of growth or thereabouts can continue into the indefinite future. That means the Government is moving into cloud cuckoo land as far as the economic future of the State is concerned. The Government has forgotten or, probably more correctly, does not understand in the first place the iron laws of economic development within the capitalist system. Growth moves in cycles. Integral to capitalism are cycles of growth and recession, of boom and slump. As sure as night follows day, unfortunately, slump follows boom. When an economic recession develops, which is, unfortunately, inevitable in the years ahead, privatisations effected in the conditions of boom will be seen to have devastating consequences.

What is privatisation? We have a Government which tries to fool the people about the real meaning of privatisation. It tried to con the people in the Telecom Éireann privatisation affair, a pretence that this was a move to people's capitalism, to giving the people some kind of real say in an important asset such as the telecommunications infrastructure. It abused and misused our heritage by playing a folk song called Dúlamán Gaelach on the television every night when trying to convince the people that they should gamble their hard earned money and scarce resources on Telecom Éireann.

Since then, the real face of privatisation, even in the conditions of boom, have revealed their ugly reality – naked greed by senior management to grab what could be grabbed and a grab by big business to get its hands on the assets which should have properly remained the responsibility and in the ownership of the people. Now we have the billionaire, Mr. O'Reilly, vying with the multi-millionaire, Mr. O'Brien, to lay hands on the fixed line section of Eircom. It is a vindication of the view I expressed at the time of the Telecom Éireann privatisation that people's capitalism is nothing but a pretence, a short conduit of these crucial State assets from the hands of ordinary people into the hands of the real intended target of big business ownership. That will also be the fate of ICC Bank if the Government gets its way.

When ICC Bank is privatised, it will be in the marketplace and will be like an unfortunate mouse torn between the various big cats in the granary. It will be a question of which paw is the largest in getting this profitable resource which now belongs to the people. We will have a large bank and possibly an internationally based bank but it does not matter even if it is a home based bank. The criteria for these banks is simply the bottom line of the maximisation of their profit at whatever cost. Will there be a commitment in private ownership to maintaining employment as a priority within ICC Bank? Will there be a commitment to the small business person and the self-employed person who the ICC helped when other banks would not look at them for extending loans or security for small business ventures or enterprises they wished to set up?

In the context of economic growth, the major banks are falling over themselves to give loans left, right and centre to anyone who will darken their doorways, small business people and self-employed people included. The profit rates and the mass of profit are sufficiently attractive for them to do that and even to take a few chances because they know they will gain massively. However, that will change dramatically in different economic conditions. We will then see the real face of the big banks once again. They will be as ruthless in closing down the small people as the multi-national companies were in this State during the recessionary conditions in the 1970s and 1980s, when they ruthlessly retrenched, let thousands of workers go and moved to where they could make greater profits.

It is pathetic to see Fine Gael Deputies and Fianna Fáil backbenchers praising the past role of ICC Bank. They then go on to wail about the uncertainty that might follow privatisation, and whether the banks that will acquire ICC will take a different approach to the small, self-employed person. The Fine Gael Deputies are following the Government like lemmings over the cliff of privatisation on this issue. They are betraying the small people.

At the Joint Committee on Enterprise and Small Business I heard Fine Gael Deputies and Fianna Fáil backbenchers make loud noises when there was talk of removing the ban on supermarket chains engaging in below cost selling. They rightly pointed out this would undermine small shopkeepers and that when those small people were wiped out, the prices would be ruthlessly jacked up again by the big supermarket conglomerates that had wiped them out because they now controlled the market. Those same Deputies are now voting for the privatisation of ICC, which is the equivalent of what would happen in the supermarket wars if they were allowed have their way. We have a sense of what that will mean.

I have also heard Deputies today decry the social irresponsibility of the major banks in closing down branches in small towns in rural Ireland because, apparently, they were not making sufficient profits. In some cases, it was not the case that they were not making any profits but that their profits were not big enough to justify the branches staying open, so they moved to bigger centres of development and left the people of rural Ireland high and dry. Deputies are decrying that, quite correctly, but then went on to support placing in the hands of those very same big banks, what is now a very valuable State owned asset, which adopted a far friendlier approach to the small people struggling to make ends meet or to survive in this country's economic life.

To justify privatisation, we have been given examples in the past of public ownership where there were inefficiencies and money was being lost. However, ICC is quite different. Last year, it made £25 million in profits. In the first six months of this year, it made £18 million in profits. It is a very successful State owned enterprise, which could be a part model for how the banking system could work here. However, the Government is proposing to hand it over to the ruthless concerns that control the big banks.

We have the usual ESOP, which is an attempt to buy the support of the work force and trade unions through granting some of the shares to the work force in return for agreeing to privatisation and many other concessions. Unfortunately, the trade union leadership has long since sold the pass on the question of privatisation. It has swallowed the propaganda that market capitalism cannot be challenged. Trade union leaders now sit down with the bosses and the Government in all these so-called partnership bodies and meekly go along with handing over to multi-nationals and big business State assets that up to several years ago they would have relentlessly defended. That is a shameful and sad development within the trade union movement which will be deeply regretted in the years to come, when the real effects of privatisation are seen in different economic circumstances.

I stand for the real involvement of workers in semi-State companies. I deplore the bureaucratic mismanagement and resultant inefficiencies that obtained in State owned and semi-State companies in the past. I want real involvement and real democratic structures within the State owned sector, where workers have a real say and real involvement, as should the customers of the banks. That is the alternative to this sop of an ESOP arrangement, by which some shares are given to the workers. I remind the leadership of the trade union movement that it has a responsibility to the working class people as a whole, who will suffer when the effects of privatisation are really felt in a future economic recession.

Céim eile náireach atá san mBille seo, an Bille um Banc ICC, 2000. An bun-chúis atá leis an mBille seo, an chaipitil agus na scaireanna ceadaithe a mhéadú ó £40 milliún go £80 milliún. Faightear an chuid is tábhachtaí den mBille in alt 4, a cheadaíonn don Rialtas an banc a dhíol. Príobháideadh Bhanc ICC atá i gceist ag an Rialtas agus is é seo, i ndáiríre, príomhfháth an Bhille seo agus an príomhchuspóir atá ag an Rialtas i láthair na huaire.

Tá príobháideadh achmhainní poiblí agus comhluchtaí Stáit mar fhealsúnacht thar aon fhealsúnacht eile ag an Rialtas i láthair na huaire. Teastaíonn ón Rialtas go mbeadh gach achmhainn phoiblí agus gach comhlucht Stáit díolta leis na boic mhóra i gcóras an chaipitleachais, faoi mar atá. Dheineadar amhlaidh le Telecom Éireann agus teastaíonn uathu an rud céana a dhéanamh le hAer Lingus. Feicimid cad a tharla i gcás Telecom Éireann, nó Eircom mar atá an comhlucht ainmnithe anois. Tháinig saint agus ocras saibhris chun tosaigh, rinne na boic mhóra airgead mór ach chaill na daoine beaga. Is mar sin a bhíonn i gcónaí agus is mar sin a bheidh, ó thaobh phríobháideadh achmhainní Stáit. Ní dos na daoine beaga a dhéantar an príobháideadh ach dos na boic mhóra agus dóibh siúd a thugann airgead mór d'Fhianna Fáil agus don Phairtí Daonlathach agus d'Fhine Gael, chomh maith. Ansan tugann an Rialtas cinneadh i dtaobh comhlucht mar ICC atá fábharach dos na boic mhóra a dteastaíonn uathu a lámha a chur ar an achmhainn thábhachtach seo.

Thug Banc ICC seirbhís do dhaoine féin-fhostaithe agus do lucht beag gnó. Fuair daoine seirbhís agus cabhair ó ICC nach dtabharfadh na bainc mhóra dóibh, go háirithe nuair nach raibh cúrsaí eacnamaíochta sláintiúil sa tír. Anois, tá Rialtas againn atá ar meisce leis an bhfás i gcursaí eacnamaíochta agus ceapann lucht an Rialtais go leanfaidh an fás ar aghaidh go síoraí. Ní leanfaidh, faraor. Tagann teip i ndiaidh an fháis i gcónaí, agus sin a tharlóidh. Is oth liom a rá gurb iad na daoine beaga agus an lucht oibre a bheidh thíos le fealsúnacht an phríobháideachais atá á chur chun cinn ag an Rialtas. Mo náire an Rialtas agus mo náire Fine Gael atá ag tabhairt tacaíochta dó.

Mr. Durkan:

I am glad to have an opportunity to speak on this Bill. I do not wish to devote too much time to my good friend and colleague, Deputy Joe Higgins, who has expounded the benefits of socialism. He rounded on Fianna Fáil and, naturally, I agree with that. I am not so sure I agree with him as regards Fine Gael, the Labour Party and the other organisations, including the trade union movement. It is difficult to be in a position where everyone else is wrong and I do not wish to go too deeply into the concept put forward by Deputy Higgins.

Times change and we must change with them. Market forces, consumer demands and public demands change. I remind the Deputy of the sixties, an era in which we were all politically aware. In the UK and here as soon as a difficulty arose every ailing company was nationalised. That was the panacea for everything. We would have utopia. Alas, nothing could have been further from the truth. Even monopolies, be they national or international, must face competition. Unless they are protected from competition they cannot survive and they did not do so.

Mr. Higgins

(Dublin West): It only nationalised the lame ducks.

Mr. Durkan:

It nationalised the motor industry which was the backbone of the British economy at the time. Every car here and in the UK was manufactured in Britain. What happened in the meantime? With nationalisation it all fell apart to such an extent that the effects are still felt in the UK and it is incapable of effectively working the market to its advantage. The Ford and Japanese motor companies that have huge investment there have indicated they are pulling out. There is a serious flaw in Deputy Higgins' argument. I do not wish to encourage invective but I would be delighted to discuss that concept at greater length. However, extremes in either direction are dangerous. There is a balance in the middle. If we can achieve that and have privatisation with competition the consumer will benefit.

I regard myself as a kind of DIY expert. Some time ago I had occasion to buy plumbing materials. The last time I did that was probably 30 years ago. There is a big difference in the cost of them now and then. Going on Deputy Higgins' analogy he would say they are more expensive now but they are not. They are less expensive and that is because tariffs and barriers have been removed. Restrictive practices have been removed and market forces have been allowed to develop. Those who supply goods and services are not impeded. The EU tried to free up the market and remove obstacles. Remember how we were under the protected market Deputy Higgins espouses. We were in the shadow of a bigger, more powerful nation. At all times our trade agreements were of greater benefit to it than to us. In that restricted and controlled marketplace the smaller operator cannot win. It is right that Members pay tribute to the work of the ICC and other smaller banks over the years. They had a niche market and provided for it in a way that other greater, more powerful agencies did not. That is important. I hope that, in the future, regardless of what happens such markets are covered. I could quote chapter and verse on countless small banking groups that helped out numerous people when larger institutions would not listen to their case.

At a time when industrial investment and the creation of jobs was sought after as a matter of urgency ICC met the people and understood their problems and concerns. It reacted accordingly and, as a result, was able to put in place the supports necessary in an economy such as ours. Other economies that benefited from the industrial revolution were much more sophisticated in terms of marketing and economies of scale. With the limited size of our economy we would have been at a distinct disadvantage were it not for the activities of those smaller institutions.

I compliment not only ICC but TSB and the other smaller banks which provided a range of services that had a social as well as an economic content. When I was much younger I recall that we did not have an amalgamation of the various banking groups but a series of banks. I presume it was of some benefit to amalgamate them but there were also dangers to competition.

In order to support the free market it is essential to have access to it and that is given by way of financial support. Denial of access to the financial resources necessary to provide for industry, big or small, is a crucial factor. The massive multinational investment we have at present would not have happened if there were not access to financial resources and if the multinational corporations had not confidence in this economy and in the companies concerned.

I would like to have a longer time to discuss these issues with Deputy Higgins. By no stretch of the imagination are matters as simplistic as he suggests. It would be beneficial to have a debate on these issues from time to time and recall matters we may have forgotten or flaws that have shown up over the years and consider how best to contribute to their improvement.

Debate adjourned.