The primary purpose of this Bill is to extend the statutory limit on the amount of capital available to Fóir Teoranta to finance its operations. The Bill also provides that Exchequer loans be written off equating to certain investments which were transferred to the company from Taiscí Stáit Teoranta and which are now worthless.
The company was set up under the Fóir Teoranta Act, 1972, and it began operations in April, 1972. Its function is to provide reconstruction finance for industrial concerns which may be in danger of having to close down or suspend activities because they are unable to raise necessary capital from the normal commercial sources. They must, however, be basically sound and be capable of becoming viable. It is, therefore, the last link in the chain of State assistance for industry. The governing legislation requires that industrial concerns fulfil a number of conditions in order to be eligible for assistance from Fóir Teoranta. The employment content and the capital employed in them must be significant, the owners must have made a reasonable contribution to the initial capital, prospects of profitability on a permanent basis must be reasonable and there must be evidence that failure to receive financial assistance would have serious repercussions at national or local level. In this context industrial activity has been interpreted in the broadest possible terms to include all economic activities that can reasonably be described as being of an industrial nature.
Fóir Teoranta has already disbursed approximately £5 million to firms requiring assistance. Some of this finance was used to honour investment commitments inherited from Taiscí Stáit Teoranta, which was dissolved in March of last year, but the greater proportion was in respect of applications made to the company itself. To date it has provided assistance to 56 firms with a total employment content of approximately 8,500 persons. For the most part this finance has been disbursed as long term loans and the amounts provided in individual cases have ranged from as little as £2,500 upwards. Generally it is small and medium-sized firms which have availed of the Fóir Teoranta facilities. Where the company has undertaken a commitment of £250,000 or more in individual firms, the prior approval of the Ministers for Finance and Industry and Commerce has been obtained because of the very significant amounts involved.
As the State lender of last resort the company's objective is to take all possible steps to strengthen the position of a firm in temporary difficulties which has reasonable prospects of succeeding in the longer term. It therefore adopts a sympathetic attitude towards applications for assistance. At the same time it must be prepared to refuse assistance where the evidence suggests that the applicant firm has no reasonable chance of ultimate success and some applications have been rejected on this basis. When necessary, it has insisted on management changes and the nomination of some directors as a condition of providing financial assistance. These steps have been necessary to guard against the danger that support might be given to concerns which might not of their own accord implement the changes required to improve the prospects of profitability.
The legislation which established Fóir Teoranta provided that the company could borrow to a limit of £7.5 million to finance its operations and it was expected at the time that this limit would suffice for a few years. The demand for reconstruction finance, however, has far exceeded what was anticipated. As I have already indicated, the company has disbursed approximately £5 million to date; in addition to this it has had to borrow £1 million to recoup the industrial Credit Company in respect of bridging finance provided to Taiscí Stáit Teoranta and it has undertaken further commitments which have brought it close to the existing statutory limit on its borrowing powers. Amending legislation to increase its resources is therefore essential to enable it to continue the useful work it has been doing to date.
Section 2 of the present Bill proposes that the new limit on borrowing by Fóir Teoranta be fixed at £17.5 million, an increase of £10 million on the present limit. Up to now the company has been almost entirely financed by borrowing from the Exchequer, as the returns on its share and loan investments, including those inherited from Taiscí Stáit Teoranta, have been negligible so far and this position is likely to continue for some time. It is proposed therefore—in section 3 of the Bill—to raise from £7.5 million to £17.5 million the limit on the power of the Minister for Finance to provide loan capital to the company.
On the dissolution of Taiscí Stáit Teoranta their liabilities and investments were transferred to Fóir Teoranta. These included investments in Aviation Development Ltd, Cloth Manufacturers Ltd, (Cootehill), Ever-fresh Foods Ltd, and Fenian Gun Company of Ireland Ltd. These four companies have ceased trading and the amounts accruing to Fóir Teoranta from the realisation of their assets will be negligible. The book value of these investments stands at £1,142,000 and Fóir Teoranta carries a liability of an equal amount to the Exchequer in respect of them. The company proposes to write these investments out of its balance sheet and it is desirable that it be relieved of its liability to the Exchequer in respect of a similar amount. This is the purpose of section 4 of the Bill. The company does not wish to carry a liability in respect of worthless investments inherited from Taiscí Stáit and the write-off of this liability will help towards giving a fairer reflection of the cost to the Exchequer of Fóir Teoranta's activities.
The high level of demand for reconstruction finance may be attributed to a number of factors, such as the rapid technological change in industry, the continuing impact of free trade and the falling value of money as a consequence of which individual firms require larger amounts of assistance than had been envisaged. It is predictable that in this situation a number of basically sound industrial concerns will experience temporary trading difficulties and it is very desirable that the State should take positive action to ensure that these firms are not forced out of business unnecessarily. In view of the heavy cost of providing jobs in new industries, it is important that every possible step be taken to maintain existing firms and preserve employment where firms appear to have a reasonable chance of survival. The achievements of Fóir Teoranta in the relatively short period since its establishment have been considerable. The company provides an orderly and expert procedure for the rehabilitation of these potentially viable firms and it constitutes, therefore, a valuable element in the range of facilities designed to assist our industrial development.
The present legislation will make available to Fóir Teoranta an additional £10 million to carry on its functions. It is envisaged that this additional provision should suffice for at least two years ahead. I should qualify this, however, by pointing out that in the field of reconstruction finance, where there is not an even pattern of demand for assistance, it is even more difficult than usual to predict requirements in advance. Apart from increasing the limits on the finance available to Fóir Teoranta no further changes in the company's governing legislation are considered necessary at this stage.
I therefore confidently recommend the Bill for the approval of the House.