Seanad Éireann debate -
Wednesday, 20 Jun 1973

Vol. 75 No. 2

Fóir Teoranta (Amendment) Bill, 1973: Second and Subsequent Stages.

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

Minister for Finance (Mr. R. Ryan)

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.

Cáit Uí Eachthéirn

Is beag atá le rá agamsa ach fáilte a chur ós comhair an Bille seo. I should like to welcome this Bill. It was an important piece of legislation originally when it came before the House and was welcomed on all sides. It has saved some industries from liquidation and has saved many jobs. When originally this Bill came before the House I was very perturbed that no provision had been made for the tourist industry. We know that within the last two or three years, owing to the position in the North and many other factors outside our control, many hotels have run into deep waters. I do not know if there is legislation to rescue those. I am very sorry they have not come within the ambit of this Bill. When the Bill was previously before the House I made reference to this problem. Our tourist industry is the second biggest we have. It is regrettable that no provision has been made for rescue operations for hotels which have run into difficulties through no fault of their own.

Mr. Halligan

I should like to extend the customary welcome to the Minister. I have two brief comments to make. First, at a time when our home market is being progressively opened up by the EEC requirements many small and medium-sized industries are experiencing considerable difficulties in maintaining their base and there is evidence of this in the trade statistics showing the increased percentage of competitive imports eating up the home market. I wonder if perhaps the orientation of Fóir Teoranta could not be changed somewhat, so that instead of regarding this body as a last resort to which a firm in some difficulty might come, they could themselves, particularly with reference to the Minister's own Department and the Department of Industry and Commerce, initiate surveys of industries and try to identify at an early stage industries that would require such help. Very often when firms come to Fóir Teoranta it is too late to save them. Many of our industries are old family-established industries and very often they do not realise that they are in need of help.

The Minister recognised in his speech that a job saved in home industry, particularly a job serving the home market and thereby saving imports, is at least the equal of a job created in a a new industry, say, export-orientated. There might be room for closer collaboration between the IDA, the ICC and Fóir Teoranta in a global attack on the problem of employment preservation and development.

The second point I should like to make is that the Minister pointed out that special criteria exists for the refusal of loans. Perhaps he could expand on the criteria used in view of the fact, which he pointed out, that firms come as a last resort to Fóir Teoranta and a refusal literally means the death-knell for a company and, therefore a loss of employment. Could it be possible that since the firm makes its approach as a last resort, the Minister might be used as a court of final appeal? Perhaps we could have made available to us from time to time a list of those firms that were helped and the reasons for giving such help, and also a list of those refused help and why these refusals were made.

Mr. McCartin

I should like to state that I welcome this increase in financial assistance for industries which are in difficulties. From my experience, particularly in the West of Ireland, I could give many reasons why some industries find themselves in difficulties but the obvious reason is the lack of education and tradition in the management of industries. There is also a lack of education and tradition in the crafts and trades that are important at the present time. It is not only important to provide financial assistance for industries which are finding it difficult but also to provide a comprehensive educational programme for managers of such industries. There is a demand at the present time for goods and services which a few years ago we did not expect would arise. We have not the equipment or personnel to turn out many of these goods and services fast enough.

We should take special note of the fact that we will not get them fast enough because we have not the training or tradition in both management and the manufacture of the crafts. Not only is it important to provide financial assistance for industry it is also of the greatest importance that a programme of education in management be started without delay. Some two- to three-week courses in management have been provided in particular small industries, but a course of night-classes in each county would be of great benefit to managers in industry. It is particularly difficult for people in the West of Ireland where, I might say, none of us have ever met a manager, let alone learn anything from one. It is very important that such knowledge be conveyed without delay.

There is another point I should like to raise with the Minister. Am I correct in believing that Fóir Teoranta do not assist industries which have not already got assistance from the IDA? I do not believe this is a good thing. There are many industries which for one reason or another have not been grant-aided by the IDA and who deserve some assistance from this fund. From an economic and social point of view the jobs are important, even if the IDA in the first instance might have decided that such industry was not a subject for grant-aid.

Mr. Harte

Just to supplement the last point made by Senator McCartin I should like to make it clear that I do not quite understand whether the money is paid in respect of trying to make a thing viable without having regard to the other factors that go to make it viable. For example, under the Industrial Training Act, 1967, and through recent upward movements the whole question of levying grants can colour reality. Consequently, people have to provide a certain amount of the total wage bill so that they can have training managers, training officers and job demonstrators appointed. If people are to be paid it would be very desirable if we knew that the money which they will receive to get out of trouble, as it were, was not sufficient and that consideration would be given to some further supplement towards a properly-geared training scheme.

Minister for Finance (Mr. R. Ryan)

May I express my own sense of pride and pleasure in making my own maiden contribution to the Seanad? It may seem strange that one can be a Member of the other House of the Oireachtas for so long, as I have been, and not participate in the proceedings of this Assembly, but I feel privileged to do so today. I should like to thank Senator Halligan and his colleagues for the welcome extended to me.

We can all accept what Senator Ahern properly said about the tourist industry. We share her desire to assist it through its present difficulties. Of course, it is a matter for Bord Fáilte and the ministerial responsibility of the Minister for Transport and Power. Fóir Teoranta is an organisation which by statute is limited to giving assistance in the industrial sector and on that account, while one can sympathise with the objective of the remarks of Senator Ahern, tourism, unfortunately, does not qualify for assistance from Fóir Teoranta.

In relation to some of the points made by Senator Halligan, the IDA, ICC and Fóir Teoranta work very closely together. Indeed, the team which operates Fóir Teoranta is a team which is seconded by the ICC to do the work of Fóir Teoranta and there is a continual link-up of information and skills between the two organisations.

Section 17 of the Fóir Teoranta Act, 1972, provides specifically that there will be an annual report to the Minister for Finance who, in turn, must make the report available to the Houses of the Oireachtas. The first financial year ended on 31st March last and the report is in the course of preparation and will be made available shortly. I think people will find this a very interesting document. It will show a pattern of disturbance and difficulty arising out of free trade and other conditions—these difficulties will be overcome because of the availability of this money. It must be some cause of anxiety to us that it became necessary to establish a State money-giving institution as a last resort to provide such money to tide the industry over passing difficulties. I suppose it is because the private sectors handling money were not prepared to take the risk. Although we are, in this Bill, writing off some losses, the losses are not commensurate in any way with the benefits which have flowed from this operation. We are hopeful that there will be a continuing improvement on the return in future years.

A great deal of the loans have been advanced on the basis of providing a moratorium for a number of years against the payment of interest and repayment of capital. This is done to ensure that firms will be given liquidity to get them over their short-term difficulties. If immediate repayment of principal and interest were demanded, the very benefit conferred would be neutralised. Therefore, it will be some time before the money given will flow back to Fóir Teoranta.

The point was made by Senator McCartin that Fóir Teoranta could not help any firm which had received IDA assistance. I do not think there is any foundation for that belief and if he has any information to the contrary——

Mr. McCartin

Which had not received any assistance——

Mr. R. Ryan

Neither suggestion has any foundation. Fóir Teoranta may give assistance irrespective of whether IDA grants have been received or not.

Mr. McCartin

To my personal knowledge, it has a very good foundation.

Mr. R. Ryan

It should not. Many of the concerns now receiving help were brought into being long before the IDA was established, so it could not have any foundation. Fóir Teoranta are not concerned with the origins of any organisation. What they are concerned about is the possibility of industrial firms continuing in existence if they are given financial assistance to get over some temporary difficulty. If that can be established and there is an industry with reasonable prospects of success, giving reasonable employment, then the assistance will be given.

One of the greatest difficulties is one to which Senator Halligan referred, and that is the inadequacy of notice given by firms when they are in difficulties. I think one of the great deciencies in our State services is that we do not have any particular Ministry responsible for identifying areas of potential industrial difficulty. It is everybody's responsibility, so it is no-body's responsibility. I should hope that measures will be taken to identify likely pockets of difficulty so that assistance can be given well in advance of crisis situations.

My own ministerial experience is that quite frequently I am approached by industrialists in difficulty, or by public representatives who have not the least idea where to go for help. They know that their situation is so difficult that they have no prospect of getting money from the bank. Again and again it is found that the door is about to be closed on the following Friday, the pay-packets for that week are in jeopardy for the workers and no preparation has been made by way of accounts or providing information which could be of assistance to Fóir Teoranta. Fóir Teoranta have provided something in the nature of a fire brigade or ambulance relief service. I think they have cut through the red tape rather successfully. They have had very considerable demands made upon them in the last year. I hope that the information services which they are developing will make the assistance which they can give better known to the people throughout the country and will help to ensure that longer notice will be given in future by firms which are getting into difficulty.

Quite often it is the lack of management skills which gets the firm into difficulty and this very lack of skills and information leads them not to call upon services which are available to them. We all have a responsibility to ensure that more is known about Fóir Teoranta so that many of the closures which are pending can be avoided.

Senator McCartin and Senator Harte mentioned retraining both for management and for workers. These, of course, come under the responsibility of IMI and AnCO. Fóir Teoranta again and again called upon the services of these organisations to provide training necessary for firms which are in difficulties. As I mentioned earlier, difficulties often arise out of lack of information and lack of liaison between firms which are in difficulties and Government agencies which can help them. Rectifying this is part and parcel of Fóir Teoranta's work. I think they have been doing it successfully, so that is why I trust the House will approve of the Bill.

Question put and agreed to.

Bill put through Committee, reported without amendment, received for final consideration and passed.