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Seanad Éireann debate -
Tuesday, 21 Dec 1971

Vol. 71 No. 18

Fóir Teoranta Bill, 1970: Second Stage.

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

The Bill provides for the establishment of a State-sponsored company, Fóir Teoranta, to cater for reconstruction finance for potentially viable firms which are in danger of closing down because of their inability to raise capital from commercial sources. The decision to establish this company has already been announced in the Third Programme for Economic and Social Development.

In recent years a number of firms have had to face the prospect of an immediate closedown because of serious financial difficulties although there was good reason to believe that they could be viable in the long-term. While the State has provided ad hoc financial assistance to tide some of these firms over their immediate difficulties and avert redundancy, I consider that there is need for an orderly, established procedure to deal with any such cases in the future. I propose that this work be undertaken by a new State-sponsored company, Fóir Teoranta, the principal functions of which are set out in section 4 of the Bill. Briefly, these functions are to provide finance for eligible concerns by such means as acquiring shares and debentures, issuing loans and bill finance and guaranteeing borrowing. It is envisaged that finance on concessionary terms as regards both interest and repayment will be necessary in many cases.

In order to be eligible for financial assistance a concern must comply with a number of conditions. It must be engaged in an industrial activity. Employment and capital invested in it must be significant. The proportion of the promoters' contribution to its total capital and the prospects of profitability on a permanent basis must be reasonable. It must be able to show that further finance cannot be procured commercially and that failure to obtain financial assistance would have serious repercussions nationally or locally. It is the intention to interpret industrial activity in the broadest possible terms to include all economic activities that can reasonably be described as being of an industrial nature. These conditions are set out in section 4 (2) (b) of the Bill.

The criteria for eligibility for financial assistance cannot be measured in quantitative terms and it will be left to the board of Fóir Teoranta to decide in each particular case whether or not a firm should be regarded as an eligible concern. For instance, one of the criteria is that the capital and the employment content of the firm in difficulties must be significant. It is not possible to lay down a single minimum measure of significance in this context and it will rest with the board of Fóir Teoranta to judge each particular application on its merits. The measure of significance will be influenced by the extent of industrialisation and the employment situation in the area where the applicant concern is located. The main consideration is that if the closure of a concern would have serious repercussions locally or nationally, it will be eligible for assistance under the Bill. To clarify the matter I propose to move an amendment on Committee Stage to provide that the measure of significance of employment and capital will be determined in relation to local or national conditions as appropriate. I want to make it clear, however, that, while the company may be a lender of last resort and will give sympathetic consideration to applications for assistance, there is no intention of applying State funds in supporting industrial concerns which have no reasonable prospect of viability in the long term. I would like to add that, since the purpose of the Bill is to assist firms threatened with closure, it is not the intention that the company's facilities will be used in a situation where a concern is already in liquidation and efforts are being made to replace it with another business.

In the past the State on occasion has had to deal at very short notice with appeals for help from firms which were in immediate financial difficulties. The decisions to give help in such instances had to be taken under the threat of imminent closure of the firms concerned, with the result that a comprehensive examination of their affairs was not possible in the short time allowed. These ad hoc arrangements are unsatisfactory, and in order to avoid a recurrence of this situation it will be the policy of the new company to encourage firms in financial difficulties which need State assistance to give sufficient notice to enable their affairs to be examined in detail before the position becomes so critical that a close-down is imminent.

As a condition of granting finance, it is envisaged that Fóir Teoranta may, in suitable cases, require applicants to employ consultants and implement their recommendations including changes in their board of directors and management. This is desirable in order to guard against the danger that State support would be given to concerns which might not of their own accord make the necessary changes in their internal organisation to improve the prospects of future viability. There may be special cases where, in order to maintain the continuity of a business, Fóir Teoranta might assist in finding a new owner or arranging a merger or other form of association with another firm. These arrangements can be made administratively and it is not necessary to cater for them in the Bill. The company will have a nominal share capital of £100 and will obtain its financial requirements by way of Exchequer advances.

Section 12 of the Bill fixes a limit of £7½ million on aggregate borrowing by Fóir Teoranta and section 13 fixes a similar limit on advances from the Minister for Finance to the company. Taiscí Stáit's aggregate commitments are currently of the order of £8.8 million, whereas the amount which it is empowered to borrow is £7.5 million. This limit has already been exhausted and in the normal course I would be seeking legislative approval for an increase in the limit on the amount which Taiscí Stáit may borrow. However, since this company is being wound up, it is proposed that Fóir Teoranta should fund Taiscí's outstanding investment commitments of £1.3 million which will devolve on the new company when Taiscí is dissolved and its assets and liabilities transferred under section 19 of the Bill. The effective ceiling, therefore, on moneys which the company may borrow for its own purposes will be of the order of £6.2 million. Taiscí Stáit's existing borrowing of £7.5 million will also be taken over by Fóir Teoranta as an additional liability. It is made clear in sections 12 and 13 that this liability is excluded in fixing the limit on Fóir Teoranta borrowings.

Senators may be of the opinion that the limit is too low having regard to the growing demand for rescue finance and the falling value of money. I consider, however, that the initial limit should not be determined by the possibility that some exceptionally large applications for assistance will be received. Also, the relatively low limit will ensure that the Oireachtas will have the opportunity to review the company's activities within a reasonable period when legislation to revise this limit is introduced. It is intended that Fóir Teoranta will pay interest on Exchequer advances to the extent that a return will be earned by it on its investments. The company will have discretion in deciding what form the assistance will take in each case and the extent of any interest and repayment concessions. Normally, freedom from interest or deferment of interest will not be allowed for a period exceeding five years.

Provision is also made in the Bill for the guaranteeing by the Minister for Finance of borrowings by the company from non-Exchequer sources.

While it is difficult to estimate the amount of assistance likely to be required for reconstruction finance in the average case, it is envisaged that the firms most likely to have to avail of the company's help will be small or medium-sized. On Second Stage of the Bill in Dáil Éireann I stated that it was intended to arrange administratively that Fóir Teoranta should not provide financial assistance to any individual concern in excess of £100,000 without the consent of the Ministers for Finance and Industry and Commerce. As the finance required will come from the Exchequer and is likely to be on concessionary terms in most cases, it is considered that some ministerial supervision should be exercised where exceptionally large amounts are sought by individual concerns. The proposed ceiling of £100,000 came in for some criticism in the Dáil on the basis that it is too low, having regard to the decreasing value of money. I indicated at the time that I had an open mind on this and I have since decided, after consultation with the Minister for Industry and Commerce, that ministerial approval will not be required for investments up to a ceiling of £250,000.

Section 19 of the Bill provides for the dissolution of Taiscí Stáit Teoranta, the transfer to Fóir Teoranta of the property and liabilities of Taiscí Stáit and the preservation of its existing contracts. Taiscí Stáit Teoranta was set up in 1964 principally to acquire shares in and to issue loans to State-assisted industrial concerns. In practice the main function of the company has been the provision of loans on preferential terms in part substitution for grants for large-scale industrial projects. In the absence of a more appropriate State source the company have also been used to assist certain firms which found themselves in financial difficulties and which I referred to earlier.

Since their establishment Taiscí Stáit have provided assistance to 25 industrial concerns by way of preferential loans or share investments. In a majority of instances this assistance was for new industrial projects or the expansion of existing projects. The demand for rescue finance was not significant in earlier years but the position has changed in the past two years when the main emphasis has been on rescue operations. Taiscí have already assisted or have undertaken to assist 12 industrial concerns in urgent need of finance which they could not raise from the normal commercial sources. Taking into account the commitments which will be transferred to Fóir Teoranta, Taiscí Stáit's contribution to Irish industry will amount to approximately £8.8 million and of this approximately £3.0 million represents rescue finance. So far the company have had to write off loans and interest to the extent of £40,000 but it now seems most likely that upwards of a further £1,000,000 is irrecoverable.

The Industrial Development Act, 1969, confers powers on the IDA to guarantee loans for and to participate in the equity of industrial concerns and to give interest subsidies in respect of loans. In the circumstances there is no longer a need for Taiscí Stáit to continue to provide facilities to large-scale industrialists, while their present functions in regard to rescue operations will be taken over by the new company. It is proposed, therefore, that the company be dissolved to avoid the possibility of a duplication of State facilities. As I have already indicated, Fóir Teoranta will honour existing Taiscí Stáit commitments and will take over their existing investments.

The Bill contains a number of standard provisions relating to the formation and operation of the company. There are the usual requirements in regard to the form of the company's accounts and their presentation to the Oireachtas—section 16—the furnishing of an annual report and other information to the Minister—section 17—and the contingency of membership of either House of the Oireachtas by the directors of the company—section 18. In accordance with section 5 of the Bill, the articles of association will provide that the number of directors, including the chairman, shall not exceed seven and that they shall be appointed by the Minister for Finance with the consent of the Minister for Industry and Commerce. While the board of Taiscí Stáit have always been comprised solely of civil servants, it is envisaged that, in accordance with normal practice in regard to State-sponsored bodies, the directors of Fóir Teoranta will be chosen mainly from outside the Civil Service.

The Industrial Credit Company have acted as managers to Taiscí Stáit Teoranta and have conducted the day-to-day administration of their affairs. This arrangement has proved satisfactory as the ICC have long experience in industrial finance; they have firsthand knowledge of the problems of industry and their staff have the necessary skills required in this field. The Board of Fóir Teoranta will decide whether the company should have their own staff or whether the ICC should be invited to act as managers of the company. To cover the possibility that the board of the new company may decide to have their own staff I propose on Committee Stage of the Bill to move an amendment to section 18 to extend the Oireachtas membership provisions to officers and servants. Whatever course is followed by the Board of Fóir Teoranta in relation to staffing, close liaison with the ICC and other State agencies will be maintained.

In a period of rapid transition in industry it is inevitable that some firms, however well managed or fundamentally viable, will be confronted with special difficulties and will be unable to get finance from the normal commercial sources. It is desirable, therefore, that the State should take positive action to ensure that no firm will be forced out of business unnecessarily. This Bill provides an appropriate means for the rehabilitation of potentially viable firms and I consider it as a vital link in the chain of measures to assist industrial development.

I, therefore, confidently recommend the Bill to the House.

I must say at the outset that I am not at all happy with the concept behind this Bill, as I think it is psychologically wrong to expect to give through an organisation named Fóir Teoranta either assistance limited or rescue limited, or whatever is the correct translation, to any industry in distress. That is not to say that I do not think that assistance is not now needed and will not be further needed by industry, both because of the development of world trade, the extension of the free trade area, through our membership of the EEC, or through the even worse experience of our not becoming members of the EEC when Great Britain became a member of it.

I suppose, historically, modern Irish industry has been built up by a general acceptance of the infant industry argument, the argument that it is justifiable to protect an industry during its infancy to enable it to survive in competition against industries already established in more or less vast industrialised countries. That argument received pretty general social acceptance here and it has a long and respectable history as an idea, going back to Arthur Griffith, to Friedrich Liszt in Germany and to the Irish-American economic philosopher of the Republican Party in America, Henry Carey. The argument may be thought to have resulted in the establishment here, as well as elsewhere, of industries which would not now exist and of an industrial know-how and attitude of mind which would not exist had it not been accepted.

The other side of protection is that it tends to produce, or to permit to survive, inefficiency and fractionalisation within an industry and to create surplus capital. It is a fact that we are now faced with, and have been increasingly faced with, as the Minister I think has indicated in his opening words, evidence over the last two years that a number of these infants are either sick or are adolescents who will never mature if their origins are due to the application of protection. I am not going to argue that because I do not think it is arguable or, on an examination of the facts, would be found to be sustainable, but those industries that are sick were the protected industries.

There is another kind of protection which you can have in free trade which has thrown into the lap of Taiscí Stáit some ailing industries which survived due to concealed economic rents being enjoyed by them, due to built-in family positions or trade names in the home economy where there was, whether recognised or not, a monopoly which was not necessarily a State monopoly. A number of the industries which are now requiring assistance are experiencing, in common with like industries all over the world, the pains and sicknesses caused by technological change. They are faced with the kind of competition where a large home market gives a built-in advantage to their international competitors and where, irrespective of the economies of largescale production that such industries enjoy and are able to apply in competition with our industries, there are in fact lower wage costs. A number of our industries are sick through being overprotected. A number of them are sick because they were not discerning enough about the extent to which they were being puffed up and subsidised by monopolies or by capital which was not being realistically measured and which was yielding them an inadequate return. A number of them are sick because of inflation and because of the causes of inflation, as there is an interacting effect of taxation and inflation.

I do not wish to approach this problem in any hard-nosed way but with regard to our economic and industrial policy generally that policy must be administered in the context of the scarce resources which are available. If we ignore the fact of our scarce resources we may cause or maintain unnecessarily high taxation which will impede the competitiveness of worthwhile industries and which will make less real the rewards of managerial skill, without which we cannot organise the human resources of our people to their best advantage. If we ignore our scarce resources we may raise the price level and, thereby, the costs of producing what we wish to sell abroad. Through ignoring the fact of scarce resources we may—as no socially controlled economy will do without risk or does without cost or damage— interrupt or reduce the flow of savings, cause a waste of the resources at the disposal of people who are tempted into misapplying their resources in hedging against inflation and we may force our economy to import capital with resultant cost. The cost of providing such capital will be borne increasingly by us.

I do not intend to talk at any length about the different alternatives that will be foregone if we misapply our funds— and in using the words "misapply our funds" I am using them in the general sense of thinking correctly about how we would apply them—but we have to look at those things for which we may not have resources available if we spend our scarce resources in a way which is not thoroughly justifiable.

Before mentioning some of these and leading to a general comment I should like to make with regard to the kind of structure I would have preferred to have seen recommended to the House, I should like to refer to one factor that has not been referred to recently and which, I am sure, has been present in many people's minds. One of the factors which have made Ireland in the last 20 years an attractive place for people to invest money in and to build up industry in has been the political and social stability of the country. I do not know what the views of the House may be on this but I sense that we are here in a pre-revolutionary situation. We know, and the Minister knows, that there is at least one body of strength in the country probably for the first time—a body which threatens real danger in so far as it is exploiting the nationalistic feelings of the people— which is undoubtedly and openly determined on revolution. I am not a person who sees reds under the bed and I do not think these are reds in the ordinary sense of the word because their thinking seems to be somewhat different. The thinking that leads them into social revolution is the thinking which starts at: how do you get the support of the Irish people for the political intentions you have in mind? They do this by showing an interest in social problems and this leads on to the development of a social theory which, in fact, is a revolutionary one. Obviously, I am talking about the Official IRA. They are not the leaders in the violent movement, the horrible accounts of which we read daily, but they are there to take advantage of the somewhat dim-witted gentlemen who are leading the violent movement and they will be expected to take advantage of it.

I should like to say a few words with regard to the whole matter of the revolution. The deposit of the aggressive tendencies of psychologically deficient people is partly everywhere. This is not a full account of the revolutionaries. It only refers to some of them. To some it indicates that religion has been split and that in modern times Marxism is providing for the particular revolutionary the satisfaction which the great historical religions have previously provided and which the human seems to need.

The Senator will be relating these matters to the condition of Irish industry?

I should have thought the remarks which preceded them would have indicated to the Chair that I would do so. My remarks are to be related to the fact that the political and social stability of the country has been one of the main features attracting industry to this country. I relate that to this Bill by the obvious fact that we are dealing with the whole matter of industrial policy, as evidenced by this particular Bill.

I do not intend to say very much more with regard to what I thought a worthwhile glance at the revolutionary position in a pre-revolutionary situation. There is for many in this—"fat cats" I think was the expression that the Minister used in a speech recently, the intellectual attraction of playing with a new tool, Marxism, as a critique of our existing society.

There is much more—this is where it becomes important that we use our scarce resources properly—the genuine sense of injustice, the recognition of real evils that must be cured, backed, unfortunately, by an impatience with solutions. Now is the time because we are all thinking in terms of reforming these evils and this is the greatest time of danger. When you start recognising evils there is associated with that recognition some loss of confidence in the society whose evils are being observed.

These criticisms must be taken seriously. I would suggest to the Minister and his colleagues that in their adumbration of policy they recognise that people are not going to die for a mixed economy. People must get economic terms translated for them into terms that are meaningful. For example, they must not be provided with an apologia of the existing society, not propaganda for it, but with a realistic analysis of the factors that you are going to make up the wellbeing of the ordinary members of this community.

The people must be made to understand the factors which are going to make possible the growth and generation of worthwhile, remunerative, satisfying and, because soundly based, enduring employment. It is no good saying to them that the company must make profits or it will go out of business. The company must make profits and must understand the relationship of profits to wages and salaries. These are not necessarily in conflict and should, in fact, be moving in a justly controlled society in the same direction. We must take a larger view and not simply rub off as propaganda against our society criticisms of foreign capital. We must recognise that foreign capital is costing the community money in the terms of scarce resources to the extent of the export tax relief, to the extent that they are getting grants and, therefore, reducing the amount of scarce resources available. But in many countries it has created colonial type enclaves and even in certain circumstances exploitation.

The Minister and his colleagues would be doing very worthwhile work if they articulated a policy with regard to foreign enterprise which made people have a proper judgment to the extent to which this foreign enterprise is playing its part in helping them. The possible cost which cannot be under-rated is that native leadership in business, in industry can get undermined. This is a matter which has been touched on in the past couple of years in relation to one or two situations, and it is clearly necessary to have a wide and generous policy and not a Chauvinistic policy that has regard to the takeover of native businesses by foreign concerns. If we want our people to work with its leaders we must realise some of the defects of uncontrolled capitalism. There is a tendency for such to generate or to give rise to an uneven distribution of effective demand. There is the tendency for this to give rise excessively to the consumption of riches as was disclosed in Brazil and Germany after the First World War. The great cost of inflation is the damage it does to the position of the salaried middle classes who provide so much and have to be looked to to provide so much for the leadership of the economy and society as a whole.

With regard again to the alternative applications of the scarce resources which we have here, I take the pessimistic view, which I think is a realistic view incidentally, that there could be a fair element of putting good money after bad involved in the administration of An Fóir Teoranta unless they work out an effective policy for themselves. If we want a viable national economy, if we want to maintain our key industries, if we want industry to retain and develop its vitality, it is not an industrial Red Cross Society we need but an industrial commando unit. We need a plan to make proper use of our scarce resources and just as a commando unit will be a well disciplined body, if they are to be effective, then if the leadership of our economy is to be effective it will have to discipline the economy. A proper plan, whether applied here, in Cuba or anywhere else where the importance of developing industry is recognised, will make proper use of financial incentives.

Above all we must recognise the importance of including in the infrastructure, in the largest sense of that frequently used word, education, amenities, hospitals, housing, transport, good harbours and cargo facilities, communications such as telephones and postal services, services such as drainage, as well as flexible administration from the top and research supported by the Government. All these possible objectives of expenditure will suffer if we waste money we cannot afford on bolstering up what cannot be maintained on a long-term basis.

I do not take the view that only the large industry will survive. On the contrary, one of the things we may need most of all is an efficient small industry programme. The small industry section, in the Department of Industry and Commerce, are a well administered section and have done good work. I express keen regret—and I recognise the politics of this for all parties in this House—that we have not faced into the development, acceptance and application of regional policy. There is such a thing as an optimum distribution of industry. It may be difficult to judge what it is and one does not take into account purely economic factors, though it is surprising the extent to which economic and social factors may sometimes move in the same direction. There is a fair recognition that the concentration of industry in a large centre like Dublin is self-defeating through congestion and leads to disorderly growth.

I am not wholly sold on Buchanan. For example, I do not think the word "centre" is right. The word should be "zone". The number of regions are not right and there is insufficient recognition of the possibility of what is called "foot-loose industry", the kind of industry you could locate on the top of a mountain and it would do just as well there as if it were located in Tallaght. We need a policy regarding this, a policy which is coherently framed in relation to not merely our infrastructure facilities, but our plans with regard to provision of further infrastructure facilities. One of the points about policy for the distribution of industry is that if you get a zone which is well judged in its selection, it will have a self-generating effect in terms of the creation and growth of further industries.

Fóir Teoranta are a body set up to help industries in distress, but we also need a body capable of taking a larger view of industry as a whole. The Government, the IDA, the ICC and the banking system must all work together. Whether we form, as has been alternatively recommended, an advisory committee with regard to the use of capital, or a body vested with authority to formulate and execute policy, there will be a place for the IDA and the ICC. One of the fears I have regarding Fóir Teoranta is the danger of error caused by political pressures which have been damaging and are likely to be still more damaging to industrial policy. I should like at this point to pay tribute to Dr. Beddy who has done so much for industry and whose integrity and dedication, coupled with his good sense regarding political pressure, should be a model to the chairman of any body established with regard to industry, such as An Fóir Teoranta.

The body to deal with the companies needing assistance should be one capable of adumbrating a policy regarding those industries that will get assistance and be capable of identifying the sectors which are beyond assistance. It must be a body which will overcome the fragmentation caused by excessive protection or rendered obvious by world developments by having a policy for rationalisation. This body must be able to encourage co-operation through the provision of money or through the recommendation of taxation changes.

We have had one or two signal examples offered to us in the last couple of years where people within a particular industry have co-operated with great advantage. Irish Candies Limited come to mind. Such a body must have the skill necessary to secure cross-industry mergers, to effect a marriage of management and capital and to effect mergers with foreign companies. Having a look at our existing position, we have now equipment grants. All these types of expenditures ought to be looked at to find out whether the money being used in relation to them could be better used elsewhere. For example, could the money in a given case be better used by subsidising management for a period of years? Some of the harsh decisions that a worthwhile body will have to reach is to tell an existing management that it is responsible for the sickness that is causing the need for assistance, to get rid of it and replace it by an appropriately skilled management.

With regard to the application of grants, I recognise that they were for a time in the past necessary to export-orientated industries, but need they be any longer made available? I know the task with which people charged with industrial policy have been faced over the last decade, the task of making the world of international capital realise that this was a proper place to invest. We were in a big league and competing against, for example, the British where there is a market available for any American company that establishes itself in Scotland. It is very difficult for us to attract an American company here rather than Scotland where we could not guarantee them the British market. At the same time there was the advantage of the policy of attracting capital intensive industries in which we were importing advanced technologies and overcoming the disadvantage in not having any worthwhile industrial tradition and, therefore, no proven capacity for succeeding in this field. We have very little written on all of this, not merely here but in relation to the experience of other countries. We have got to look closely at the policy of attracting capital intensive industries and ask ourselves has it not gone far enough and does it not have an artificial effect on the whole wages structure with consequential damage to industries generating little employment and damage to industries that generate much. We should ask ourselves whether we should not now have a policy of making these grants available to industries which depend upon native skill, whether we do not now need to place more emphasis than we have in the past on the importance of training and giving skills to workers to be employed and whether we do not need much more emphasis perhaps on marketing than we have had in the past.

It is possible that we may now have to recognise that over the next decade, in or out of the EEC, there may be a smaller proportion of people employed in the manufacturing industry and a higher proportion of people employed in companies rendering services. I am reminded of this by the fact that one of my children has been given a subscription to the New Yorker and an advertisement appears there frequently to the effect that seven out of every ten people in New York will in 1975 be engaged in service industries. It is a very interesting figure and we can have some idea of where we are going by looking at where America has gone. We can get some idea of the future for ourselves by looking at the present for them.

It is my very strong view that this is going to prove a very short-lived company and that what was said in the Third Programme with regard to various bodies which were then noted is going to mean that this body will be seen as something that has got to be tidied up in relation to all the other bodies concerned. The Third Programme states—

There are at present a number of State agencies which render adaptation assistance in some form or another ...

It gives a list of them and goes on—

These perform separate and complementary functions for industry but to the individual firm the profusion of such agencies can often appear bewildering.

Now we are adding another. Instead of adding another we should be bringing them all together.

I am not so absurd as to think that what I have just said will affect Government policy at this time. But, and I accept this, we are going to have Fóir Teoranta, and therefore I look to the Bill to establish such.

With regard to the structure of the proposals contained in the Bill, the chairman of this body must be a figure of impeccable integrity, possessed of a sense of commitment to the country, with a wide experience of affairs and, above all, resistant to pressure. He must not be, as is proposed in this Bill, a person who can be removed by the Minister. The Minister for his own sake should put the chairman in a position where he cannot remove him. The soft underbelly of industrial policy is going to be in the coming years political pressure and somebody concerned for the future employment and growth of the country must be put beyond such pressure. The chief executive officer must be a man of the highest standing and supported by a highly skilled, highly paid, experienced management— highly paid without any necessary restriction such as might arise from looking at what is paid in the public service generally.

If I am correct in believing that the scarce resource of management is the gap which, most of all, needs to be bridged, it may well be that this company should be empowered to form a management company which would manage one or more or a number of industries on a seconding basis. The observations which the Minister heard from the distinguished accountant, Mr. Neil Crowley, President of the Institute of Chartered Accountants, are worth recording. With regard to the English experiment of the Industrial Reorganisation Corporation, it did mastermind many very valuable industrial mergers and other arrangements. He, Mr. Crowley, noted that, while it was Government sponsored and financed, it had an independent management and board of directors, seconded from industry and finance, with completely independent terms of reference.

He made a particular recommendation which has not been accepted— perhaps there have been difficulties found in operating it—with regard to the establishment of a body which would be partly Government subscribed and partly subscribed from the private sector. The terms of reference for the top quality management and directorate which this body would have should be completely independent of political influence. The primary objective should be the preservation of Irish industry by rationalisation, mergers and the modernisation of plants and methods. These observations of Mr. Crowley are worth noting.

I am pleased to hear that the Minister is proposing a change in policy at this time and that Ministerial approval will not be limited to the figure of £100,000. I think a very much higher figure would be in order.

The Bill is unfortunate in its definition of appropriate concerns, when in section 4, subsection 2 (b), it defines a number of matters. It states, at paragraph (b) (iii), that the proportion of the promoters' contribution to its total capital is reasonable. Now the word "promoter" is, I think, here unfortunate. It has a particular meaning. It refers, in law, to the persons who got the company off the ground. The promoters at the time when the company may need assistance may no longer have any association whatever with it. It might be that the promoters' contribution is either no longer owned by the promoters or has since been supplemented by contributions from many other people who were never promoters. So that the proportion of the promoters' contribution, being very small, is not reasonable. A promoter has been defined, in a leading case, as one who undertakes to form a company, with reference to a given project, to set it going, and who takes the necessary steps to accomplish that purpose. In the old days, having done that, he would have sold off his interest and long since have ceased to have had any association with the company that he originally promoted. Perhaps the Minister would look at that word and consider some alternative.

There is the usual provision for the dissolution of Taiscí Stáit. One understands why Taiscí Stáit is being dissolved. Taiscí Stáit, we have been told, has taken a stake, either by way of loan or acquisition of share capital, in 25 companies. If Taiscí Stáit has taken the position of shareholder in any given company, without procuring an alteration of the articles of association of the company in which it has taken a stake, it may find itself in the position that the shares it has in that company cannot be transferred by statute, or in any other way, without the approval of the board of directors of that company. This is not to say that it is beyond the power or the competency of the Oireachtas to enact legislation and to deliver the rights of property. Clearly it has a constitutional right to do so. Here is a case where, if a shareholder in a company takes a share, he is bound as if in law under seal in favour of all the other shareholders. That means that, apart from Taiscí Stáit having taken on an obligation, the other shareholders have rights entitling them to refuse to transfer Taiscí Stáit shares without approval in accordance with the articles or the procedure laid down in these articles. I do not think this will have arisen in any other case because I do not think any other body has been dissolved that I can think of which held shares in private companies where this provision might exist. If it were lawful, if it were constitutional and in order, it may well be that the effect of this would be to render the companies concerned public companies with all the consequences that flow from company law from being such in terms of disclosure of their accounts in filing their returns. Having made the point, I will just leave it with the Minister to consider.

All the parties in the Dáil took the view that the Comptroller and Auditor General was the right person to be auditor of this company. I know it is not spelled out in the Bill that this is desirable, but I should like to express my view. Again, subject to certain constitutional problems which arise, which I will mention, I do not think he, in fact, is the appropriate person to be auditor of this body. His specialism is in the legal audit of Government Departments. I do not think he has many chartered accountants employed. I do not think that he — I am not referring to the individual but to the office — has much commercial experience. He cannot be equipped to provide a service to companies equivalent to that which could be provided by a good firm. I cannot see why what has worked with the Industrial Credit Company, which has always had a chartered accountant, should not be what should be provided for this company. State companies have, of course, almost a dominant role in our economy and it is extremely important that they have all the benefit of the audit techniques which are developing rapidly in the accountant's profession.

I do not want to go into a matter now which I have already dealt with elsewhere at some length, but I would remind the Minister that in the history of the profession by Mr. Howard Robinson he expressed the view that, despite his failure to dissuade the Government from employing a comptroller and auditor general in a number of cases, more success was likely to be achieved in the future in view of the importance that Irish chartered accountants were beginning to establish for themselves.

There is, I think, a constitutional question arising with regard to the position of the Comptroller and Auditor General under Article 33 of the Constitution where he is obliged to control, on behalf of the State, all disbursements and to audit all accounts and moneys administered by or under the authority of the Oireachtas. The proper construction of the Constitution would entitle him to rely on a certificate of security given to him by the body in which the Minister for Finance is taking up the shares. There is, I admit, a point here for consideration and, simply in recommending that it should be a practising member of the profession whose skills should be available for the benefit of the body, I think the position of the Comptroller and Auditor General ought to be carefully considered in the light of the constitutional requirement. The matter is dealt with in an issue of the Irish Jurist in 1970.

The final observation I have to make with regard to this is to express some dissatisfaction with the statement of the functions of the company. I am unhappy at these functions being so shortly stated where there are so many other matters that it might be right to have covered and where the question may arise as to whether the company can, under the statute, be incorporated with these functions since they are not stated in section 4 (2) (a); for example, the company should, in my view, even if it never exercised the power, have the power and be declared in this Bill to have the power to act as managers, consultants, supervisors and agents of other companies and to provide for them managerial, advisory, technical, purchasing, selling and other services. It should, too, have power to effect mergers. It should have all the powers required to take up any type of capital in the companies it wishes to assist.

I wonder whether the definition of an eligible concern is not excessively restrictive in subsection (2) (b). I certainly think that the requirement that all the six specified requirements should be complied with is, in fact, to render this body insufficiently flexible in its operations. Another power this body should have would be to represent the bodies in question in relation to international arrangements or achievement of co-operation. It should also have the function, where it can do so, of doing what is possible to improve the social side to Irish industry with a view to organising a structure for companies in which the workers would have an opportunity of knowing the position of the companies concerned and playing their part in having them well managed.

A final point with regard to that is that there is something to be said for at least having a policy, even if you do not necessarily tie down the company to it; there is something to be said for providing that the companies to get assistance should give advance warning. There is a lot to be said for reserving the assistance here for public companies where they would have to give advance warning, because they would be obliged in law to publish their accounts. There is something to be said for casting something in the nature of a statutory duty on such bodies, or on the directors of such bodies, so far as within their knowledge they were able to make the judgement that they were going to run into this situation. They have a position essentially of delegated political power in relation to the people whom they are employing and in relation to the economy generally. I think their obligations should be spelled out and they should be required to discharge them, in the interest of people generally.

I welcome this Bill. It fills a need that certainly showed up in many industries, in the wake of the bank strike. I can understand the Minister's concern for having an orderly approach to the financing of companies. I am a little worried when I read about shares and debentures and the length of time that it will take to raise debentures in the companies that this board will finance. Anybody who has experience of debentures will know that it takes a long time to do this. I wonder if it is envisaged that this board will give immediate financial assistance on the understanding that the debenture will be raised.

Smaller industries, in particular, are very badly handicapped for finance. I am disappointed that the financing of small companies is being taken away. It went in the 1969 Act to the Industrial Development Authority. My experience of getting finance in the form of loans from the Industrial Development Authority is not too happy from what I have heard about it. Recently I attended a course given by the Irish Management Institute on finance for small firms. There were at that course about ten people. Most of the firms represented there employed three, five or eight people and they got a series of lectures on how to raise finance for small industries. The message that came across loud and clear after two days was that if your bank manager will not give you money you will not get it anywhere else.

We had a gentleman from the ICC who came and talked to us at great length and very wisely about share capital, about equities and about taking seats on boards and going public. A number of the firms represented there were not even limited companies; they did not know what the man was talking about. I think that prevention is better than cure in many cases. I have recommended before, and I will say again, that in central funds, or even attached to the regional development funds, should be what I would term "mad money". Men might not know what "mad money" is, but every housekeeper who has a budget budgets very carefully, and she puts away a little money that she will call her "mad money". People ask: "Where do the women get the money for Christmas? Where do they get the money immediately after Christmas to go to the sales?" This is the money that women had put away — their "mad money"— that they are spending.

I think that if we had a little "mad money" in the regional development fund we might save many small industries with very little red tape. Our county development teams have paid small discretionary grants — I think it is about £250 now, or maybe slightly more — to help out a project in getting started. While a number of small industries if they could get about £1,000 or £2,000 would become quite — that lovely word that I shall ever be afraid to use after the Late Late Show on Saturday night —“viable”, and they could get out of difficulties very quickly if the county development teams could have their discretionary grants raised to about £1,000 or £2,000. In each of these regions or counties where there is a county development team, if a certain amount of money — say £10,000 or £12,000 — was allocated each year, I would say that a far greater number of small industries would start and a far greater number would have a better chance of survival because they would get finance immediately they needed it and would not have to go through a State board.

I am quite conscious of the fact that when State money is being spent by any board they have to be very careful, because they have the Comptroller and Auditor General breathing down their necks and they must be able to account for it. Therefore, they cannot move as fast as they should in all circumstances and it makes life very difficult for small industries. It is a pity that the board has to wait until the small industry is in difficulty to bail it out. I think, too, that the Industrial Development Authority has a certain role to play in this matter, again, in the prevention rather than the cure.

The selection of industries in an area, the siting of the industry in any region, are of primary concern. Much research would appear to go into these things, but I do not think that it is always done wisely. I wonder now, with the advance factories being built in certain areas in the country, if the IDA will put into these factories enterprises that might not otherwise go into them. I have in mind a particular case of a town where there are three industries, small industries employing female labour. In this town it is now proposed to put into the advance factory an industry that is female-dominated and it is exactly the same as one already started there. Senator Alexis FitzGerald referred to the fact that care should be exercised — I think I am right in saying this — about foreign enterprise coming in and undermining native enterprise. This is precisely what is being done here. In the research which was done there was, so far as I know — and I think I am very sure of my facts — no liaison whatever between the large industries division and the small industries division of IDA, between the officers who were dealing with the large projects and the small projects.

If I may, I want to interrupt for a moment to point out that this Bill deals with rescue finance and not with the IDA or any other body for which I am not responsible.

I know it does. I am saying that this is prevention rather than cure. I am only talking about the wisdom of siting two similar industries in the one place when it is courting disaster financially for one of them, and possibly for the native one. Then you have Fóir Teoranta coming in and bailing out the funds, which it need not do if the second industry were located elsewhere. And this is my point. I am talking about prevention, before we have to cure at all and I think I am speaking to the point in this — at least I hope I am.

An Leas-Chathaoirleach

Not too far away from it. I should not like the Senator to go any further away from it.

While I welcome the Bill in that it brings improvement I think that if care is taken from the start we might not have to undertake so many rescue operations afterwards.

I welcome the Bill but, at the same time, I must say that I regret the necessity for it. The fact that the Minister finds it necessary to introduce a measure of this kind postulates a belief on his part that in the near future many production industries will find themselves in grave difficulties. I say production industries because it seems to me — I may be wrong about this — that the service industries are excluded from the scope of this measure. If this is so I think it is a pity and a serious mistake on the part of the Minister because, speaking as a representative of a union organising workers in the catering trade, I can tell the Minister that there is a very serious situation developing in many hotels in Dublin and other parts of the country. Next year I can foresee a great deal of redundancy amongst hotel workers.

If hotels, for instance, are not included in the Bill they would nevertheless qualify under section 5 in the sense that they are undergoing merely a temporary recession for reasons of which we are not aware. I would ask the Minister to reconsider the position of the catering industry and of all service industries in the context of this Bill. I should also like to ask the Minister, as I am not at all certain of this, whether the Bill relates to foreign industries, to branches of multi-national companies operating in Ireland. If it does I think it is a mistake. At least one subsidiary of a multi-national company operating here have already received very substantial grants and if this particular subsidiary should encounter difficulties the headquarters of the company, sited in America, should be able to help them out because that multi-national company has a turnover which exceeds the GNP of this country. Therefore, I see no reason why the very limited funds available from our Exchequer should be used to help very wealthy companies operating in Ireland.

The Minister referred to the desirability of giving adequate notice to the new company in regard to financial or trading difficulties. I think this is very necessary but it should be a requirement and not an encouragement as the Minister said. Companies should not only be encouraged but required to give adequate notice. Bearing in mind that at present we have the highest unemployment figure for many years, that the number of redundancies this year is more than double the figure for last year and that we are on the eve of making a vital decision in regard to our entry into the EEC, the prospects for the future do not appear too bright. The situation could be helped if industrialists would give adequate notice not only to the Minister and to the new company but also to the trade unions. In 99 per cent of redundancy cases this year practically no notice was given to the unions or to the workers concerned. Consequently, the union had no opportunity, through consultation with the managements, of endeavouring to overcome the difficulties. Because no notice was given to them the unfortunate workers had no prospect of immediate alternative employment. They were simply told, a few days in advance, that they were no longer required. I am glad to note that the Minister appreciates that notice should be given. Managements should be legally required to give at least three months notice of impending difficulties. I know this is not always possible but the Government should adopt the Minister's advice in this connection.

For some time workers everywhere, particularly at Shannon and on the west coast, as well as catering workers in Dublin, have been perturbed about the outcome of the current negotiations with the American authorities with regard to the landing of American planes at Shannon. So far as I know something has happened in regard to those negotiations. My trade union and trade unions generally at Shannon and Dublin have no knowledge of what the present situation is. I fully appreciate that the negotiations have been very difficult but the workers who are directly concerned are entitled to know what the situation is at present.

They do know; everybody knows. It has been officially announced in the newspapers.

I am afraid not. I should like to make some comments on the board of directors of the new company. I take it that as the members of the board of directors are to be drawn from outside the Civil Service the Minister would invite the Irish Congress of Trade Unions to nominate at least one representative to the board of directors. If he has not already that intention in mind I would suggest that he consider it.

Would the Senator mind developing that point as to why, in the context of this company, that should be done?

I think, in general, the trade union movement should be represented on all State and semi-State boards as a matter of principle because of the vital interests of the workers in every State and semi-State company. In this particular case it is extremely important that a representative of Congress should be appointed a member of the board of directors of a company established to assist companies employing trade unionists. A representative of Congress could be of great assistance on this board.

The Bill contains the usual provision disqualifying Members of the Oireachtas from membership of the board of directors. I am not complaining about that but I should like to point out an inconsistency. As the Minister knows, quite some time ago the NIEC were abolished and it was the intention of the Government to replace them by another body on which farming interests would be represented for the first time. The Irish Congress of Trade Unions were invited to nominate six members to the proposed new body but the Government made it clear that Members of the Oireachtas nominated by Congress would be excluded. This was supposed to be a non-statutory body and consequently the disqualification in this Bill could not apply. I am not complaining about this requirement on the part of the Government although Congress will not accept it. Congress feel they should have the right to nominate whoever they desire to the new NEC.

In respect of the National Economic Council the Government did not require Congress to disqualify members of Stormont or Westminster. The point is very relevant because there is at least one representative of Stormont on the executive of the Irish Congress of Trade Unions. Consequently this gentleman — an excellent gentleman, a fine trade unionist and a fine type of person, against whom I am not making any complaint — was fully qualified to act on this important body, but not other Members of this House associated with the trade union movement. Again, I am not complaining about the inclusion of this qualification in the Bill. It is inserted in every Bill setting up a State or semi-State company. However, I should like to direct the Minister's attention to what appears to be an inconsistency, that there is nothing to disqualify a member of Stormont or of Westminster, or, indeed, of the parliament of any other country, from membership of the board of directors, but we in this House and the other House are so disqualified.

I should like to welcome this Bill and its objectives. I should also like to welcome it, as the Minister has mentioned, as something arising from implementation of the Third Programme. My approach to politics is that they are the business of publishing one's objectives and of endeavouring to obtain support for these objectives and to carry them through. I am always glad to see this happen in practice.

When reading the Third Programme, I noted in reference to this pending legislation, that in addition to the criteria which are, in fact, in the Bill covering the function of Fóir Teoranta there was a reference to the effect that it would be desirable that companies to be assisted in this way should be companies with the possibility of significant exports. While I appreciate that there are good reasons why that sort of condition should not appear in the actual legislation, nevertheless, it is a point well worth making at this stage that, as we enter the free trade situation, it is desirable that we should always have in our minds a picture of the prime need to create viable, export-oriented industries in this country.

I should like to refer to what appeared to me to be some of the difficulties facing the new company which will be formed as a result of this legislation. It appears to be a company which faces an enormous challenge and an extremely difficult task. In this regard I was interested in what the Minister had to say about the members of the board, that they would tend to come from outside the Civil Service. I was also interested in the points he made about the staffing of the new company, that the staff might be initially provided by the ICC. However, he mentioned that it might be necessary to amend this Bill slightly on Committee Stage so that the company could recruit a staff of its own. In carrying out its task, the nature, expertise and qualifications of the staff of the board are absolutely crucial to the success of the board and of the company.

The points made by Senator FitzGerald about the political problems facing the board are extremely valid, because the board will almost certainly find themselves working in an extremely delicate situation. As a young, practising politician, I am often conscious of the problems that, for example, subsection (vi) of section 4 (b) can raise in a political way. One of the criteria upon which a company must be judged before it can be considered for assistance is that if the company concerned failed to receive financial assistance there would be serious repercussions either nationally or locally. This is an extremely difficult one to administer in that in any small community the closure of one very small concern can seem to involve extremely serious repercussions locally. It is the sort of thing that public representatives and everyone else in that area would be most concerned about at a time when the case of the company concerned might come before Fóir Teoranta. There would be understandably and acceptably a strong lobby on behalf of that concern.

One of the problems that always face a politician trying to carry the responsibility of viewing matters in a comprehensive way, that is, viewing not only an area as a whole, but viewing the problems of the country as a whole, is that it is very difficult to get criteria which give some objectivity to one's judgement. I do not wish to suggest ways in which the board may deal with this sort of situation. However, it occurred to me that, for example, particularly that we now have regional development areas, if a regional development area is accepted as the sort of minimum definition of "locally", and if An Fóir Teoranta works in that sort of context, they could save themselves from much difficulty from the sort of situations and pressures they could face if the term "locally" were treated in any narrower sense.

Another problem likely to face An Bord is that of trying to weigh up all the factors when it comes to assessing a plea for assistance, or a possible case for assistance. For example, it must be tremendously difficult to judge whether many companies have reasonable prospects of profitability on a permanent basis, whether as for the time being constituted or after adaptation. If it would be easy to demonstrate that reasonable prospect, it is quite likely that the concern seeking the assistance would have been able to obtain money in the normal commercial market. In other words, by definition, Fóir Teoranta will be dealing with a situation where it is financing companies which may turn out ultimately to be casualties. They are working on a knife-edge in an extremely tricky situation. This means that the board and the company will need to have at their disposal the highest possible degree of expertise in the field of financial management and accounting and that the status of the board, company and staff, will almost need to be the same as that of the consultants. As envisaged in the Minister's speech, Fóir Teoranta may require the consultants to be employed as a condition of granting financial assistance.

The board and their staff will need to be of consultancy calibre in this difficult task of deciding upon cases. While there is plenty of expertise of this consultancy kind in the Civil Service, I welcome the fact that the board will not be basically a Civil Service board, and the staff will mostly come from outside the Civil Service. Apart from actual expertise and management and accounting, in this business of deciding whether or not a company have a future, and in helping them towards a secure future, one must have some kind of understanding of the potential there, one must have something of the entrepreneurial sense. Civil servants, neither by their training or experience, necessarily have this qualification. Some civil servants may have it and, indeed, some have been extremely successful in fields outside the Civil Service, but basically it is desirable that the ability and experience which will serve Fóir Teoranta will be the ability and experience of management and of the entrepreneurs.

I am a bit sceptical about consultancy as such. One can have good and bad consultants. I am a bit doubtful about the setting as a condition of granting finance that applicants to Fóir Teoranta for finance should employ consultants and implement their recommendations, including changes in their board of directors and management. The reports of consultants in a situation such as this must be subject to the scrutiny of Fóir Teoranta and of joint discussion between them. There have been cases where, for a variety of reasons, consultants make rather odd recommendations which have arisen through overlooking some crucial aspect of the concern or company. One has to be careful about the conditions one lays down for the granting of financial assistance.

I agree with Senator FitzGerald and Senator Mrs. Farrell that prevention is better than rescue. It is very important that the challenge facing industry at present in the context of our approach to EEC entry should be stressed over and over again. The full range of facilities available to assist industry to prepare for free trade should constantly be stressed so that both management and employees will be aware they are in a competitive situation and that their job is to gear themselves to survive and prosper in that situation.

I am pleased to note that the Minister envisages that one of the tasks of Fóir Teoranta will be to encourage firms to seek advice before they reach a situation where they may be applicants for financial assistance from the company. I am not quite clear how Fóir Teoranta will execute this, as one of the problems is the natural reluctance of management to admit that they are in trouble and the expertise of management is in trying to disguise the fact that they are running into trouble.

I appreciate this is not a matter primarily for the Minister's Department, but I get the impression that not enough attention is paid to the presentation of company accounts and reports, to the standard and the nature of the auditing that goes into the preparation of those accounts, or even into the preparation of routine reports for companies or businesses from time to time. Without published documentation or expert examination of a company or a business, it can be difficult to get proper warning of impending disaster or threat.

It is unfair to expect Fóir Teoranta always to make the right decision when much of the financial information which may be available to them from an applicant is inadequate or distorted in some way. There is a real difficulty here and the standards of accounting and reporting, financial control and management, should be appreciated by all involved in the industry or concern.

While listening to Senator Kennedy's speech on this, I was thinking that trade unionists with an interest in the prosperity of the industry or concern in which they are employed could spend a good deal more time than perhaps they do looking at the year-by-year accounts of the firm in which they are involved and endeavouring to analyse the information available.

Speaking as a lay individual I can see the difficulties involved in weighing up the actual state of health of any one company. For concerns like Fóir Teoranta, the Departments of Finance and Industry and Commerce, these are extremely important matters where a vigilant and thorough approach is of great importance.

I welcome this Bill but I can see the task facing this company. It is one of considerable difficulty. I wish them well and the best ability and expertise in facing their task. I hope that a growing awareness by management and employees of the challenges ahead of us will lead to an interest in, and vigilance concerning matters of management and financial control which, should those firms become casualties, will ultimately help themselves and help Fóir Teoranta to come to their rescue.

I wish to join in welcoming this Bill providing, as it says, to cater for reconstruction and the financing of potentially viable firms. I just wish to make a few points. The first hinges on what is a viable firm. I suggest we should take a very lenient view on this. I would be quite happy with regard to the rescue operations if two-thirds of those rescued succeeded and one-third failed. What we have got to guard against is the possibility of any firm that can be made viable failing through lack of capital. When a firm closes, the employment for its employees is at an end and new employment has to be found. We know the cost of providing that.

One of the main factors in viability is the cost involved, the ability to produce an article that can be sold competitively. In producing many articles there is a substantial labour content. It follows that if the cost of labour can be reduced in any way the article becomes more competitive. We know that Japanese, Chinese and other importers are able to undersell their products due to the low wage rates prevailing. I am suggesting that the contribution of labour to the viability of the small firm is a most important one.

When we look at this in the context of small firms which mean so much to the locality where they are located, we can see that the classical concept of management and labour does not apply at that level. They are all workers endeavouring to earn a modest living from their enterprise in the area. If there is a firm in danger of closing down and if it were a privately run affair operated by the members of the family, when threatened with closure, the members of the family know the answer. The answer is to work longer hours and put in harder work on it. When we are dealing with the district family, which is just the workers in the small local industry, I cannot see why the came formula does not apply. In this regard I have urged the Government many times to try to make the workers in those small and medium firms feel more a part of the enterprise by providing ways and means by which they can acquire some shares in the firm even to the extent of having a controlling interest in it.

As envisaged in the Bill where reconstuction finance is mentioned, this extends to reconstructing the whole enterprise. It may still be producing the same product. It may be the financial and management structure that is being reconstructed. Could we not have a co-operative or partnership arrangement between the previous owners and the workers in the industry who are depending for their livelihood on the functioning of the industry? I should like to see this body encouraging such types of arrangements, encouraging the workers in the small industry to accept the position of becoming part owners of it. If they do become part owners, it is a guarantee that it is not going to fail readily in the future because they have the same remedy as the small farmer has — to work longer hours to keep their product competitive. Maybe the need for longer hours to tide them over a difficult period may last only a couple of years. After that, things may return to normal again.

We have been slow in this country in evolving any type of a real partnership between what we call the owners or management and the workers in an industry. It does not seem to be fashionable any longer to talk about this worker democracy or works councils, which were so much in the news two or three years ago. I wonder why has public discussion gone so far away from them in the last year or two, at a time when it would seem that the redundancies and closures occurring make it all the more necessary to adopt this type of co-operative or joint approach. I should like to ask the Minister whether it is Government policy to encourage such type of joint approach in the industries being rescued here. There is nothing revolutionary about this. Even the very big firms in America encourage their employees to acquire shares in the company. Very often the shares are given at preferential rates and there is often some holding clause that enables them to be realised only when the employee concerned leaves the company. We should be thinking something along those lines.

As for the incorporation of Taiscí Stáit, I agree that it is better that there should not be any undue overlapping and this is a wise move. The previous board of Taiscí Stáit consisted of civil servants. The present one is going to be a regular board. The implication is that there will not be any civil servants on it. For continuity, and to use the experience gained in Taiscí Stáit, one or two members of the outgoing board of Taiscí Stáit who have rendered distinguished service should be appointed to the new board.

The amount of finance involved is very inadequate. I accept the Minister's assurance that this can always be remedied and could provide an early opportunity to have another look at how the system is working. I appreciate that but, faced as we are with the Common Market commitment and with the necessity to make our industries viable and competitive, the amount of finance here seems low by any standard. I hope that the activities of this board will be pitched at such a level that we will quickly need an amending Bill. I agree with previous speakers that prevention is far better than cure in this regard and the activities, staff and scope of this new board should be such as to enable them to devote quite an amount of attention to prevention.

I commend the Bill. I know it will succeed in keeping many firms from having to close while they are still in a position to continue. I think the Minister and the House should not be worried about the failure that may result from this. That is the price we have to pay and, even if there were 50 per cent failures, if we get 50 per cent of viable firms with increased employment in those firms then it would pay off in the long run.

This Bill is a rescue operation. I welcome it but I regret its necessity and I sympathise with whoever will be on the board of directors. A company which already complies with what are set out as the conditions of rescue in this case under subsection (4) — I do not quarrel with them. I say they are necessary — can fail and will fail only by reason of very few causes: mismanagement, misappropriation, mis-entries in accounts, just those three.

When I say "misappropriation" I do not attach to it its ordinary meaning; I speak of directors, shareholders, drawing out of the finances of the company more than the company can afford. This is my interpretation of misappropriation, not the ordinary type of larceny or mis-entries in books. A company which does not indulge in one of those three things, in the normal course of events, will have relatively little difficulty in getting funds from normal banking and financial funds. Most banks, most financial firms, advancing money appreciate that during the teething problems of a company in its first year, two years, three years, it is bound — certainly in the first year — to make losses. A company that breaks even in its second year is doing very well, and a company that makes a moderate profit in its third year is progressing nicely. If you have accounts badly-kept, a company has no hope. I think that this is one of the big problems of the board of this new company that is now to rescue them.

I have seen companies get large grants from IDA, get them under completely false pretences, get them when their accounts were deliberately wrong. I have seen those accounts audited by auditors. I have had the accounts and I have been shocked by them. Of course, one way you can make accounts appear very attractive is by putting completely false valuations on work in progress and stock in hands, either raw stock in hands or finished stock in hands. This is one of the things that are so frequently done. Therefore, it is necessary a director or accountant from the board now to be established should really inspect their finances and their methods and system of book-keeping, estimate their stock in hands, their raw stock, and their work in progress and how it compares with their turnover for the year. No company is going to have a stock which is double its annual turnover or equal to it. They will very quickly put their finger on fictitious figures there.

I agree completely with Senator Kennedy when he says that these rescue operations should not apply to companies which are merely subsidiaries of large concerns. Again, what happens or is apt to happen is that it may be found that this State is providing capital for a company, a large company, abroad which is itself short of capital. What it does, and what it can do, is perhaps supply raw materials to the subsidiary in Ireland. It can overcharge for its raw material so as to put the Irish company in difficulty. It can provide that the Irish subsidiary will pay it large amounts for what it euphemistically calls "technical advice". Technical advice, of course, means nothing. It is one of these figures that the inspector of taxes and nobody else can complain about.

I would be inclined, certainly, in so far as those companies are concerned, to be very suspicious of their application for finance. There are quite a number of them in this country. We have seen some of them open up. We have seen some of them close down within a few months of opening after getting grants and so on. This has happened in the past. Therefore, I think they should be treated with the very greatest suspicion.

The important thing with any Government concern giving grants, loans, or otherwise to any company is to ensure that its books are properly kept. From month to month, from half-year to half-year, from year to year, it should know exactly where it is going. That is not an impossible request to make of any company. It is a normal request; it is a normal demand. The company that cannot do that has really no hope of success. It is just hoping from today until tomorrow, from this year until next year. Any assignee in bankruptcy will tell you that of the various bankruptcies, liquidations and so on with which he has to deal, 99 per cent of them are due to the absence of a proper book-keeping system. A proper book-keeping system involves also that those who audit those accounts must be scrupulous and honourable in their dealings, in particular in their dealings when they are applying to Government Departments for some spare finance in advances or otherwise. They must ensure that, if work in progress and raw stocks in hands and finished stocks in hands are given at a certain figure and certified at a certain figure by a managing director or by the manager, there is some reasonable grounds for believing that those figures are correct.

The next thing that puts companies into liquidation, and particularly family concerns, is this. They have an industry, perhaps employing anything from 20 to 100 people, then they start living at a very high rate and the finances which should go back into the business are being drawn and expended on themselves, on the directors and on their families.

Having regard to the increased cost of machinery — a machine bought five years ago for £5,000 will cost £10,000 today and in another five years will cost £20,000 — not less than half the profits of the business should be put back into reserves, in very many cases two-thirds of the profits, depending on the degree and nature of capitalisation. Otherwise, families and directors who draw more than that from their companies, in my opinion, for all practical purposes are misappropriating. They are misappropriating on that section of the community who can least help themselves — the workers in those companies and their families.

Provided that these things were done; provided also, that the auditors auditing the accounts of these companies were up to a certain standard and honoured their standards, then the board, dealing with rescue finance, and advancing them rescue finance know exactly where they are going.

Today anybody can call himself an accountant. There is no junior clerk in this country who cannot simply put up a plate, or a notice in his window, call himself an accountant, and start auditing the accounts of companies which are not public companies, and preparing figures. I do not know where they get the various qualifications or what they are. I see quite a large number of letters after the names of some of them. Unless these people have a certain standard, a certain tradition, the figures given by them, in my opinion, are worth very little.

Provided these things are done, then I can see that, on occasion, a company will need rescue finance due to very special circumstances, which might be bad debts. We had many of them after the bank strike for which no provision could be made. It might be that large consignments were exported which had not been paid for and for which there had been no insurance. It might be a fire against which there was not adequate insurance. It might be one of a hundred things and, in those situations, I can readily visualise that rescue finance is required. For the most part, however, the local bank manager knows the standard of the manager of the company. He knows whether too much has been drawn out, who is the auditor, what his standards are, and so on. For the most part, for a temporary rescue operation, he is prepared to come to their help.

Again we have rescue operations in particular circumstances. I have seen one recently in my own county. I do not like to say it but my personal opinion is that there are certain rescue operations which are only cutting the gad still nearer to the throat. The money would be better employed otherwise. I can sympathise with politicians, and I can sympathise with Ministers, when there is a great outcry locally, but we must realise there are certain circumstances in which you just cannot possibly hope to salvage the firm. More raw materials are being gradually becoming outdated. Let us take, for example, jute in the manufacture of bags. We now have plastic bags. That example comes to mind but I could mention very many other things as well.

There are also certain mines which are gradually being eroded and becoming progressively uneconomic and which, possibly, are completely uneconomic at the moment. There is nothing you can do to rescue those. To a great extent the fault lies with the managers and directors of those companies. They should have had the foresight to see that three, four or five years in advance. They should have had the foresight to provide against it and to see what the alternatives were: "Where shall we go if this becomes eroded? Where shall we go if the material which we are now manufacturing becomes outdated in four or five years time?" It is utterly silly for a company to live from this year to next year. They must realise that they may have put their money into it, but their money is the least concern. Their workers have invested their lives in it and that is more important.

I wish this new company every success, prosperity and luck. I would be very happy if, in fact, it could make dividends. I believe it is absolutely necessary, but I should like to ensure that we, the Irish people, are not being cheated, and that the companies which get the benefit of any funds advanced are companies in which everybody, from the managing director down, is prepared to play his part and is prepared to go short himself. If he expects the general public to help, he too must help. Therefore, companies which might find themselves in temporarily straitened circumstances could have a bright and a prosperous future.

I must admit to having rather mixed views about this Bill. To my mind it is something like the curate's egg: good in spots. I agree completely with the intent of the Bill, although I find a certain incompatibility between some of its sections. The Minister said in his opening address:

The Bill provides for the establishment of a State-sponsored company, Fóir Teoranta, to cater for reconstruction and finance for potentially viable firms which are in danger of closing down because of their inability to raise capital from commercial sources.

I may be unique in this regard but I have found over quite a long period of years, in connection with quite a few industries of different types, that a potentially viable firm very seldom, if ever, has difficulty in securing capital from the established lending agencies such as the joint stock banks, or merchant banks, or possibly private sources. The intent behind the Bill is, to put it quite bluntly, to provide a financial fire escape. If that is so, there is a good deal of what I might call muddled thinking behind the Bill, because it does not set out to make it quite clear that this is, in essence, the lender of last resort. The provisions which the Minister has outlined in the Bill requiring certain conditions to be fulfilled, conflict with what I understand to be the intent of the Bill, that is, to be a lender of last resort.

Section 4 (b) (i) of the Bill states:

... it is engaged in an industrial activity (including any activity ancillary to industry) ...

When the Minister is replying I hope he will give us a more general explanation of what is meant by "activity ancillary to industry". If I were to elaborate on that question I would include what Senator Fintan Kennedy said here earlier on. I would include the catering industry and the hotel industry and I would include transport, shipping and road transport. I would regard all these as ancillary to industry and employing a big number of people whose employment might be endangered by the closing down of a substantial industry, or a group of industries, in any particular section, particularly in the very sensitive area of the south and west of Ireland.

Paragraph (ii) reads: "...the employment and capital employed in it are significant..." I do not know what "significant" means. It has several interpretations. I take employment to mean substantial employment: perhaps several hundred people, perhaps 100 people, perhaps 50. "...the employment and capital employed in it are significant". I do not know what the Minister means by "capital employed". Does he mean loan capital or does he mean capital invested by the proprietors? Paragraph (iii) reads: "...the proportion of the promoters' contribution to its total capital is reasonable ..." Senator FitzGerald has already asked the Minister to elaborate on the word "promoter" which certainly has a number of interpretations in various industries. Paragraph (iv) reads:

... it has reasonable prospects of profitability on a permanent basis, whether as for the time being constituted or after adaptation...

I do not want to be pin-pricking about words, but, to my mind, "reasonable" is a fundamental expression in this whole Bill. What is "reasonable"? Who will interpret what "reasonable" means? Presumably it will be the board. The decision to grant a loan, or to withhold it, could depend on the words "reasonable prospects of profitability". Paragraph (v) reads:

... its continuance is in doubt because of inability to obtain its financial requirements from commercial sources...

Paragraph (vi) reads:

... its failure to receive financial assistance would have serious repercussions either nationally or locally.

What are "repercussions"? Does this mean repercussions in the sense of substantial loss of employment? Does it mean political repercussions such as a by-election pending in the particular area, or something like that? I suggest to the Minister that the word "repercussions" would certainly need to be qualified and expanded and perhaps he could do that on the Committee Stage.

I agree with a good deal of what Senator Nash has said, and that is one of the reasons why I have doubts about the efficacy of this Bill. Merely giving money as a last resort lender to a firm in dire straits and in danger of closing down, is not the answer. It certainly is not the whole answer. I agree with Senator Nash that a great many of the problems in this country are not due to lack of capital, but to lack of competent management. They are due to the set-up of our industrial structure with an enormous number of family firms, some running into several generations, where proper regard is not had to the necessity for replacing capital or providing new plant and there is the inability to recognise that depletion of assets, such as buildings, has been responsible for a day of reckoning arriving. These types of firms, of their very nature, are not the types that will look for help. Certainly until disaster strikes, most of them will not see the writing on the wall. Family firms may operate in old buildings, for instance, written down to next to nothing in their balance sheets although the plant has gone on satisfactorily for years. These are all part and parcel of a situation that can build up perhaps over two generations before the blow falls.

This Bill should have more teeth in it. In addition to being a lending agency of last resort the board should also have the necessary power to step in and, where necessary, reorganise a firm or even force a merger of firms in a locality where firms are competing on hopelessly uneconomic terms and for reasons of a clash of personalities refuse to recognise the economic facts of life. I do not know whether this is the time to talk about putting that sort of teeth into this Bill or whether it requires some other development. Merely lending capital as a last resort to a company or companies about to collapse is not the answer.

I am worried too — and Senator Alexis FitzGerald made the point very wisely — about our scarcity of capital. On more than one occasion the Minister has drawn the attention of the Dail to the fact that we just cannot have capital for everything that requires it, be it industrial, agricultural or social development. We just have not got enough capital to go around and we must of necessity advance capital having regard to proper priorities. For this reason I think that this board, of necessity, will have to be selective about the industries it will assist. If that is so it will defeat the purpose of the Bill. I can see it doing that only if it can step in and provide management, even for a short term, and reconstruction of a financial nature as well as handing out substantial amounts of capital.

I have read the Bill very carefully and I have also had a look at the Taiscí Stáit Act which brought into being the Industrial Credit Company. I cannot see why the Taiscí Stáit Act could not have been amended to do the job we are now proposing to do by setting up yet another State company. I know the Minister has given what appear to be, on the face of it, reasonably valid reasons. The IDA will now undertake the financing of very large industrial concerns and this company will look after the smaller and medium-type firms in need of urgent finance. The Taiscí Stáit Act could have been amended, if necessary, to do just this. I do not honestly see the necessity for another company to be added to the proliferation of State companies to undertake financial assistance to the industrial sector.

"Commercial sources" are also two significant words in this Bill. Before the ailing company or companies can qualify for assistance, they must have tried all the existing financial resources for capital — and there are quite a few of them. I would assume that the joint stock banks would be included under the heading "commercial sources" and the merchant banks, the Industrial Credit Company and probably other lending agencies such as insurance companies and building societies. Further "commercial sources" might include corporate and private interests prepared to loan capital to an ailing firm for various reasons, such as a potential takeover or to secure an outlet for the lenders' products. Manufacturing firms might buy up a distributing firm. Having failed to secure capital from one or more of these sources the potentially viable industry would then turn to Fóir Teoranta for assistance and the board would decide whether or not this should be forthcoming on the basis of its potential viability, the owner's financial contribution and the employment factor.

I may be wrong in this, but I think it is the third factor that will count, the employment factor and quite rightly. We should face up to this issue and say that the purpose of this board is to maintain employment in a company that will go "bust" otherwise, until some alternative employment can be found for the workers who are likely to be disemployed. I cannot see the desirability of propping up an industry that will go to the wall in any event. It would be far better — again giving teeth to this Bill — if the board had the necessary power to take what is good out of the ailing company and to provide the capital, either through its own agency, or through the Industrial Credit Company, to a firm or firms which would take up the workers becoming disemployed.

Again — and I am sure the Minister and the House would agree — the more we apply our scarce capital to viable industries and to potentially viable industries and to good industries that are going to expand, the better. The facts of life will certainly hit us very hard if — I am sorry to use the word "if" instead of "when" which I used on several occasions previously — we go into the Common Market. Some of the industries will not know what hit them. That seems to me to be the position in regard to the lending side of this Bill.

Going back to Taiscí Stáit, why could it not do all this with, possibly, some amendments to the Act? Is the Minister not satisfied that amending legislation would do? One of the reasons the Minister mentioned was the necessity to avoid overlapping of functions between the IDA — and I should like to join with Senator Farrell in paying tribute to them — who have done a magnificent job, and the small industries section of the Department. The small industries section would be a much more useful agency for looking after the needs of small industries particularly in rural areas. They have the experience and the personnel. They know where they are going and they have already proved their value to a number of industries especially in rural areas. I know from my own experience that the Industrial Credit Company have in the past helped some potentially viable concerns during the course of their successful history. I hope the Minister will agree with me on that.

As a lender of last resort the State has had quite a long and chequered career. I can remember — and I am sure the Minister and other Members of the House can remember — the Trade Loans Guarantee Act of 1939, the principal Act, and the amending Acts of 1949 and 1953, which enabled the Minister for Industry and Commerce to grant or guarantee certain classes of loans the application of which was calculated to promote employment. Another way of doing this would be to revive the Trade Loans Guarantee Act which was terminated some years ago, for some reason I have never been able to discover, and which did a lot of good work as a lender of last resort during its comparatively brief history.

It had one advantage which I think was an improvement on this Bill. Under the Trade Loans Guarantee Act we did not have a board as such, but there was power to set up boards whose personnel or members had competence and experience in certain specified types of development. One of the weaknesses I see in the board which the Minister proposes is that unless they are miracle men their experience will be limited to the type of industries they participate in. I should like to see more flexibility which would allow specific boards to be set up to deal with specific industries, such as the clothing, textile or shoe industries, and to advise the Minister or this board on them.

Is the National Development Fund still alive? It gave large sums to both the private and public sectors. Has it been wound up? Taiscí Stáit is now to be wound up as well and finally we will have Fóir Teoranta. In case any of my remarks may be misinterpreted, let me say that there is a great need for a lender of last resort, particularly at present when we are going through a period of painful readjustment in preparation for free trade. However, I do not think this Bill presents the full answer. It will merely provide, under certain conditions, loan capital as a last resort to firms. I suggest that most of the conditions laid down will be ignored and, in the final analysis, the number of men likely to be disemployed, or the local or national reaction to such a disaster, will be the first consideration. If that is so we should say so quite bluntly in this Bill. I would rather see a Bill with more teeth in it and a board with the necessary managerial experience and know-how to revive an industry or to replace it with an alternative industry.

The word "viability" is open to many interpretations, depending on a number of circumstances, including the personal judgment of the board members. I absolutely deplore — and I have said this in connection with other Bills that have come before us — this hire and fire section where the Minister can appoint a chairman and fire him without any explanation whatsoever. If you pick a man and put him in charge of a responsible board such as this, he should at least know he will be on that board for three or five years. At the end of that period, if the Minister does not approve of him or if he is not up to scratch by all means do not reappoint him. If you want a man of the proper stature to do a job, you have to give him a good salary, good conditions and some degree of permanency, otherwise you will get second-rate people. I am sure the Minister wants to get first-class people to do this job because it is an important job. It is important for this reason, amongst others, that when news gets around that there is a lender of last resort a lot of business that might possibly be taken on by the existing recognised lenders will be "pawned off" on this company. Companies will be told: "This is not a job for us. We suggest that you apply to Fóir Teoranta, this is what they were set up to do." I am afraid we will have a rush over the next couple of years for funds from — I would not like to call it a fairy godmother — this source and that the Minister will find it necessary to return to the Oireachtas in a short time to look for more money.

Somebody expressed the viewpoint that he hoped the Minister would come back here to look for more money. I am sure the Minister will take the view that it is a sad reflection that we have to loan this money at all, that the firms in question are not viable, and that there is not a reasonable chance of their becoming viable under their own volition. I hope — if I might express an individual view — that there will not be that regard for them. My better judgment tells me that there will be quite a big call on these funds.

I have already commented on the fact that "the chairman and other directors shall be appointed, and may be removed from office, by the Minister with the consent of the Minister for Industry and Commerce". I agree with much that has been said about worker participation. The Minister made one or two realistic "cracks" in the other House when somebody was pursuing that line. He suggested putting a worker's representative of some of the successful companies on the board rather than a representative of the ailing companies. I agree with him there. You could embarrass a worker by putting him on one of these companies, especially if difficult decisions had to be made. I think that point should be kept in view. I know of many workers who have saved money through their normal employment and have started up small businesses of their own which were very successful. I should like to see those people getting every possible help.

I would like to suggest that the members of this board should be selected not only for their general commercial qualifications but also for their ability to assess the human factors involved in a particular industry and its reasonable chances of future viability, subject to the provision of extra finance. In regard to additions to or possibly resignations from the board of the company to be assisted, Fóir Teoranta should be quite ruthless. If it becomes necessary to retire a representative of a family which has been there for several generations, in the interests of the industry and its workers, he should be retired. If you want to give him a golden handshake that is another day's work.

An Leas-Chathaoirleach

May I intervene to point out that it is now 6 o'clock. I should like to find out what the wishes of the House are in regard to its business.

Five minutes will be sufficient for me to conclude.

May I suggest that if Senator Russell is the last speaker we might allow the Minister to conclude now rather than adjourn and come back again?

I shall agree if Senator Russell is the last speaker. There is no one else, is there?

An Leas-Chathaoirleach

No. Would Senators who intend to speak, rise, please? Is it agreed that the debate continues without interruption?

On the basis that the Minister gets in next.

Reference was made in the Bill to the possibility of employing consultants. I must admit that I am biased against consultants. I can see a useful function for them, but I think that in this country we have gone overboard with regard to consultancy firms. I would be very slow to make it a condition of employing them before giving capital. Consultants are all right for a specific job. I consider it to be completely unrealistic to bring them in to put that business on a potentially viable basis. If there was a condition for bringing in consultants they should be given the narrow specific tasks to do.

Senator FitzGerald referred to the industrial reorganisation corporation that was wound up by the Conservative Government in England and it was also referred to by Mr. Crowley in a recent speech. I made the same comment here a few weeks ago, when we were speaking in this House on the motion in connection with the EEC. A body of this type would serve a very useful purpose in this country. It might not be possible to combine their powers with a Bill such as this. But a body that could take a good hard look at the industrial set-up and situation in this country, and decide where mergers should take place in the interests of the future of the industry and its workers, would serve a very useful purpose.

The Bill in its present form lacks clarity and appears to be trying to achieve incompatible ends, for example, "assisting potentially viable industry short of finance and expertise at board level, and preventing unemployment in sensitive and ailing industry". I suggest to the Minister that the two may not be incompatible. They may well be in a number of industries; they may not be in others. For that reason some amendment is necessary to the Bill. The necessity for such a company is clearly apparent but the means proposed by the Minister are not clearly the right ones. Perhaps I should qualify that by saying that they are not altogether the right ones. There is a good deal in the Bill. However, the Minister should look at it again. I hope that, with some amendments, he will bring back a Bill with the necessary teeth to be not only a lender of last resort but also, where necessary — this is an important point made by Senator Nash — to provide management and skills where they are lacking. Also, if necessary, they should be ruthless in rooting out personnel, however attached they may be to the business, and putting in people who will run the industry on a viable long-term basis.

First of all, I should like to deal with the very last point made by Senator Russell, who had made it a few times previously in a different form. He said he hoped that the Bill would have more teeth than it has at the moment. At the same time, he deplored the reference that I made to consultants lest I was indicating that this body would be bringing consultants into every company that came to them for assistance.

I want to make it clear, first, that the role of Fóir Teoranta is to provide a rescue finance and to be a lender of last resort. They cannot have any power in relation to any company unless that company is seeking their assistance. It is only at that point that they can have any teeth. It was in that context I explained that they would be able, where it seemed appropriate, to provide as a condition of giving assistance that consultants would be employed. They would be able also to insist as a condition that the consultants' report would be implemented, even if that went so far as to specify that there ought to be changes from top to bottom, including the board of directors, the managing director, and so on. I mentioned this merely to show it was at that point that the teeth came in: not to say that this would be applied in every single case where there was an application, because this could not be so.

The debate illustrated very clearly the dilemma in which one finds oneself in trying to deal with this problem and in trying to produce a Bill that will deal with the problem. Some Senators urged that the question of viability should be very generously interpreted, and that we should be satisfied if 50 per cent of the cases receiving assistance from Fóir Teoranta turned out to be successful. On the other hand, a number of Senators warned — I think they meant the goose that laid the golden egg — that we might get a situation in which Fóir Teoranta was being used to prop up firms which had no possibility of survival under ordinary economic conditions.

The trouble is that both these points of view have to be taken into account in drafting a Bill of this kind. Efforts have to be made to try to ensure that we are not going to be propping up non-viable concerns with State money. We do not intend to do that. Unless a concern has reasonable prospects of viability, it is not eligible for assistance. On the other hand, we know from past experience in cases which, if some form of State assistance had not been available, the concerns would have closed down with very serious consequences and in which as a result of State assistance, the firms concerned are now healthy, viable propositions. We have, therefore, tried in the crucial section of this Bill to walk a tightrope and to lay down criteria, but at the same time to provide sufficient flexibility, so that we can meet the two almost diametrically opposite requirements as outlined. Having done that — and I think we have gone as far as we can go to meet the difficulty — we then have to decide that that is the most that the Oireachtas can do. Therefore, it is a question of the interpretation of that section in a reasonable and intelligent manner by the board of Fóir Teoranta. That is the position not only of the Oireachtas but of the Minister.

In this connection I might point out that some questions have been raised about why we did not amend the legislation relating to Taiscí Stáit, instead of introducing this new legislation. Senator Russell referred to this and to the fact that in the other House I had given some reasons for this. I do not think it is necessary for me to spell out all the reasons, but I should like to point out that, contrary to what was said, we are not simply adding another State body to the list we have already; we are adding one, but at the same time we are taking one away.

A number of the functions carried out by Taiscí Stáit are now open to the IDA which they were not until the passing of the 1969 Act. In regard to the secondary function of Taiscí Stáit, which was the provision of rescue finance, its framework is not in many ways very adequate or suitable to that operation. Experience has shown this and Senators will find that, on the whole, the cases dealt with by Taiscí Stáit in that category have been substantial cases and the machinery is not geared to cover small and medium size cases which we are trying to cover under this Bill.

I should like to point out that Taiscí Stáit directors are all civil servants. The intention is that the board of Fóir Teoranta would not be composed entirely of civil servants and might have no civil servants on it. Fóir Teoranta would be autonomous and would not be subject to any Minister in their deliberations. This is a fundamental change from the approach involved in Taiscí Stáit and it is one of the reasons why amendment of the legislation covering Taiscí Stáit would not be sufficient to achieve what we are trying to achieve here.

While I understand why a number of Senators referred to the necessity for prevention rather than cure, I am not going to follow them down that alley as I do not think I would be in order in doing so and it is not a matter I can deal with under this Bill, interesting though it may be.

Senator FitzGerald raised two legal points. First, in regard to the use of the word "promoter", he quoted a legal definition of the word "promoter". As he clearly indicated, that is not the meaning of the word "promoter" that is intended in this Bill. I am not sure if it is the correct word for what we intend to describe but I will have a look at the point the Senator has raised.

Senator FitzGerald raised also the question of whether the transfer of Taiscí Stáit shareholdings in companies which they have assisted would be enforceable under the provisions of this Bill. I shall also look into that problem.

A number of Senators referred to the question of giving advance warning of dangers of close-down. One Senator suggested that this Bill ought to provide that such warning would be compulsory, at least in the case of a public company, if it were to benefit under the provisions of this Bill. I have given serious consideration to this but it is not feasible.

Senator Kennedy rightly mentioned something which we know to be true. In many cases where a firm is about to close down, very little notice is given to the trade unions concerned. We know also, as I have indicated, that frequently very little notice is given to the Government or to Government agencies who might be expected to help in keeping the firm open. This is our practical experience. If one examines this more closely one can understand why this tends to happen. Firms which are in difficulties do not wish to advertise this because very often the mere fact that this is known can put them out of business. This is a fear with which a firm in difficulties lives always.

As another Senator pointed out, through defects in the methods of keeping accounts or otherwise, the fact that firms are in difficulties may not be obvious very far in advance of their real difficulties, although they should be. There are other reasons why it is not always possible to get early warning but the effect of making it legally compulsory to give some notice before benefiting under the provisions of this Bill could well be that one would find oneself dealing with a firm which was significant in all the terms of criteria set out in the Bill and in terms particularly of employment, either nationally or locally, about to close down, which had not given due warning and because that provision was there, you could not assist it and the firm would go out of business and the employees would lose their jobs.

We would be very unwise to incorporate such a provision, desirable as it would be. In practice, you would run great dangers of stultifying the whole intention behind that provision. I regard this question of early warning as a very important one and one to which I would expect the Board of Fóir Teoranta to address themselves as a matter of extreme urgency and find out what practical measures they can devise to overcome it and in particular how effectively they can broadcast among industrialists the advantages of giving early warning on a confidential basis, so that steps can be taken to assist if difficulties are arising. I do not think it can be made compulsory; we have to depend on whatever methods can be devised to encourage and educate people to do this.

Senator FitzGerald referred to the question of the appointment of the Comptroller and Auditor General as auditor of Fóir Teoranta and said that in his view this would not be the right appointment because he did not regard the office of Comptroller and Auditor General as being suitable for this kind of operation. The Senator is aware there are a number of differing views on this matter. He may be aware that an amendment was put down in the Dáil to this Bill which would have had the effect of making the appointment of the Comptroller and Auditor General compulsory. I did not accept that amendment although I indicated that the intention was to employ the Comptroller and Auditor General particularly as long as the bulk of the moneys provided for Fóir Teoranta were coming from the Exchequer.

I mention this to illustrate that there are some diverse and strongly-held views on this but my position in this is as I have indicated. I do not wish to make it compulsory that the Comptroller and Auditor General should act, but he should act so long as the bulk of the money for this company is being provided by the Exchequer.

The question of the constitutionality of the Comptroller and Auditor General auditing the accounts of state bodies is a wide and rather difficult one. It is a matter for expert legal consultation and I do not think I should become involved in it on this present Bill. I would point out also that the functions of this company, as set out in section 4 subsection (2) (a), are the principal functions of the company and that a number of the other functions which some Senators, particularly Senator Alexis FitzGerald, expressed disappointment at not seeing in the Bill, will be contained in the memorandum of association. The Bill is setting out simply the principal functions.

What is the position as regards Members of either House having an opportunity of seeing the other objects? I agree with what the Minister is saying, and it is important, but it is also important to bear in mind that we are passing enabling legislation for a particular purpose and not for other purposes which need not be contemplated by the Oireachtas.

The other purposes would, of course, have to be subsidiary to the principal ones which are set out in the Bill. If they were not so subsidiary they would be ultra vires.

As the Minister knows from his memories in practice, it is normal practice in a memorandum of association to provide that the various objects shall stand independently and one will not be subsidiary to another. I hope that is borne in mind.

I cannot say what the exact wording of the memorandum will be but clearly the setting out in this Bill of certain objects makes them primary and of greater importance than any others that could be set out in the memorandum of the objects of association.

I do not wish to interrupt the Minister. I know he is dealing with this very fairly. The kind of thing I have in mind here is this is intended obviously to deal with industry other than agriculture. Supposing you had as one of your subsidiary points something which would cover agriculture then the position would be that, legally speaking, Fóir Teoranta could then engage in rescue operations in agriculture which has never been discussed by the House. It might be a good thing but it has never been considered.

All I can say is that, offhand, I cannot produce the section and interpret it but I should be very surprised if any such object would not be ultra vires.

Senator Farrell inquired if there would be immediate financial assistance given by Fóir Teoranta in a given situation on the understanding that, say, a debenture would be raised later. As I have indicated, Fóir Teoranta would be anxious to avoid a situation in which immediate assistance was necessary. They would much prefer to have a situation in which notice was given. This is one of the objects. We are trying to get the thing on a more orderly basis. They would, of course, be anxious to avoid any undue delay in processing applications. I have a suspicion that I know something of what she has in mind in raising that point. May I suggest to her that she look again at what happened in the particular case she is thinking of and she will find that the delay was not entirely due to one side. There were misunderstandings which may have led to a certain difficulty she has in mind.

Senator Kennedy asked whether all service industries, and particularly the catering industry, would be included in the legislation. The legislation is designed specifically to provide these facilities for industry. The inclusion of other sectors of the economy could militate against the whole purpose and efficient operation of this new company. I would remind the Senator of the fairly substantial assistance given to the tourist industry a few months ago by way of additional capital and also of the fact that the tourist industry as such is a separate sector of the economy. It comes under other legislation. Another Minister is primarily concerned with it. It would be better as a sector of the economy to stay within that category rather than have to share out with the rest of industry under the heading of what we have here. It is not intended to be included under this Bill.

With regard to the question of assistance being given to the subsidiaries of foreign companies, the position is that such companies, provided they meet the criteria of the Bill, would be entitled to benefit under the provisions available. It would not be proper to discriminate against such companies but I would point out that it is fairly unlikely that the subsidiaries of multi-national companies would require assistance from a lender of last resort. It may be that they would try but that they would actually require and not be able to get the requisite money anywhere else is less likely. In such circumstances they are unlikely to get assistance from Fóir Teoranta.

The view was expressed by Senator Russell that politically viable firms very rarely if ever have difficulty in getting finance from established lending agencies. I would have to differ with him on that.

Potentially.

Sorry, where I said "politically" I meant "potentially". The experience of Taiscí Stáit is that they have provided rescue finance in a number of cases which seems to upset the theory behind Senator Russell's statement. Some concerns of considerable importance simply could not get their requirements from the normal commercial sources. The majority of them were likely to survive in the long term. Also, most of us have some experience of a situation in which, say, a bank puts in a receiver in a company and the receiver is concerned only to recover the money to pay the bank if he is put in on their behalf. I have seen cases in which firms which were potentially if not actually viable have been closed down as a result of this. They went out of existence as a result of this kind of operation.

Would the Minister agree that the banks have loaned money also to potentially viable firms?

I agree, certainly. I know of cases where they have lent money to firms which were not even potentially viable. I am not criticising the banks. I am simply saying, as a matter of fact, that experience shows that there are cases where the firm is either viable or potentially viable and cannot raise the money from normal commercial sources. This is the only point I wish to make.

I should like to say in relation to something said by Senator Farrell, in case there is any misunderstanding about it, that the Industrial Development Authority do not give loans for any industries, large or small. They have power to guarantee loans but only as part of a package for the setting up of a new industry. They have no function in relation to the giving of loans for existing industries for ordinary operations.

From where do small firms get money?

May I remind the Senator when she talks of that, that the small industries programme, which was set up some years ago, included, amongst other things, a special arrangement with the commercial banks for the lending of money to small industrial projects which had been approved under the scheme. She may be thinking in terms of other small industries which do not go under that scheme at all.

I am not talking about them.

This is a normal function of the commercial banks. I should like to make it clear, too, in regard to something said by Senator Kennedy, that the introduction of this Bill does not mean that I anticipate any particular difficulty in the production industry, as he said, because what we are doing is simply to provide on a more streamlined basis an existing service which is there for industry. I am not saying, and indeed I did draw attention to the fact, that rescue finance has not been required much more in the last two years than prior to that. I am not trying to dispute that at all. What I am saying is that the introduction of this Bill is not an indication of our anticipating greater difficulty in the future. It is simply trying to provide a better service in this sector for industry.

I should like to tell Senator Quinlan that any proposition put in for the reconstruction of a company, whether it involves control by the employees of that firm or not, would be eligible provided that it meets the criteria set down here. There is no question of its being ruled out on that ground. The criteria are set out here in the Bill.

I agree with Senator Nash that wrongly certified accounts are a very serious matter. If such were discovered and the case were grievous enough I would expect that action would follow, at least professionally, if not in court. I would also say that, if it were known that wrongly certified accounts were deliberately wrongly certified and submitted to this or any other State company and that action was not possible on foot of it, the auditor concerned would go on a black list and would find that it did not pay him to have made such a return.

Again, I do not want to give any wrong impression; I am not aware of this happening on a widespread scale, although it has happened, but every effort would have to be made to combat such a development. The point being made by Senator Nash was really in relation to people who have no or very doubtful qualifications as auditors and accountants.

I have endeavoured briefly to deal with the main points which were raised in the debate. I probably left out some. Perhaps it would be more suitable, in relation to some of the points at any rate, that they be dealt with on the Committee Stage. As I have indicated there are certain amendments which I would intend to have introduced for that Stage and there may certainly be some others arising out of the discussion here today. I have indicated the matters that I intend to look at again.

Question put and agreed to.
Committee Stage ordered for Tuesday, 11th January, 1972.

Ba mhaith liom beannachtaí na Nollag agus na h-Athbhliana a ghuí ar gach Seanadóir agus oifigeach na Tí. I should like to wish Senators and officers of the House a very Happy Christmas and New Year.

The Seanad adjourned at 6.35 p.m. until Tuesday, 11th January, 1972.

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