Seanad Éireann debate -
Thursday, 8 Apr 1976

Vol. 83 No. 20

British & Irish Steam Packet Company Limited (Acquisition) (Amendment) Bill, 1976: Second Stage.

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

Minister for Transport and Power (Mr. P. Barry)

In 1965 the State acquired the British & Irish Steam Packet Company Ltd., the principal object being to ensure effective Irish participation on the Irish Sea in the interests of trade and tourism. The purchase price was £3,600,000. The issued share capital of the company at that time was £1,600,000.

The assets of the company at the time of their takeover by the State consisted principally of three vessels, the old Leinster, Munster and Innisfallen, which carried passengers, goods and livestock and a limited number of cars, four cattle-general cargo vessels, the Kilkenny, Meath, Dundalk and Glanmire, and two general cargo vessels, the Wicklow and Inniscarra. These vessels were for the most part out-of-date and ill-adapted to meet the developing needs of sea transport. In particular they could not cater for the revolutionary change from general cargo to containers, nor for the emerging trend towards the roll-on-roll-off movement of passenger cars and freight vehicles.

The new board of the company in consequence found it necessary to embark on a thorough-going policy of modernisation, involving the acquisition of three new roll-on-roll-off passenger ferries, four container ships and a roll-on-roll-off cargo ship. In addition it was necessary to invest in new specialised berths and terminals to cater for containers and ferries, as well as to acquire a stock of containers. The capital expenditure involved amounted to over £23 million. Very nearly 80 per cent of this investment was financed by loans or long-term leases or agreements.

Following an investigation of the company in 1970 by consultants who reported that an undue proportion of the B & I's capital resources was made up of loan capital, an extra £3 million share capital was taken up by the Minister for Finance under the British & Irish Steam Packet Company (Acquisition) (Amendment) Act, 1971, bringing the issued share capital of the company to £4.6 million.

Even after the raising of the issued share capital to £4.6 million, the capital structure of the company still reflected a substantial imbalance between share and loan capital. As against a total capital expenditure of over £23 million, the equity content of £4.6 million represented only 20 per cent leaving a disproportionate share of 80 per cent made up of loans and similar forms of financing.

This loan orientated capital structure is throwing an unduly heavy burden on the company by way of interest and principal payments. For example, the company achieved a net profit of £281,000 in 1974 after allowing for financial charges of £1,000,000 in that year, and will record a further surplus of £139,000 in their 1975 accounts after allowing for financial charges of £1,400,000 in that year.

The need for further share capital at this juncture was established by reports from consultants engaged at the behest of the Minister for Finance, who have undertaken a review of the company's operations and of their prospects and financial outlook up to the end of the decade. The consultants made clear that, apart from share capital needed to restore the loan-equity balance, it was likely that a requirement would arise for substantial additional capital towards the cost of any further expansion of the scope of the company's activities, or of the replacement or renewal of the vessels of the fleet or of terminal facilities.

For these reasons I have deemed it advisable to take the opportunity to provide scope in the present legislation for meeting possible future needs of the company as well as their present requirements and, accordingly, I am, with the concurrence of the Minister for Finance, seeking the agreement of the Oireachtas to empower the Minister for Finance to take up a further £15 million share capital in the company. In effect, the company's authorised share capital is being increased by this amount.

Apart from what is needed to restore a reasonable loan-equity ratio, the B & I Company will also require capital to help finance the acquisition of an additional car ferry vessel. They have, in fact, in the past week, made a formal proposal to me to order another car ferry to be built at Verolme Cork Dockyard for delivery in 1978. The matter is under active consideration at the moment in consultation with the Minister for Finance and I would hope to be in a position to make an announcement shortly. The company propose to have two vessels on the Cork-Swansea route, complementing the two operating on the Dublin-Liverpool service.

I believe that I should avail of this occasion to undertake a general review of the B & I's activities, especially in the light of the investigations recently conducted by consultants.

The company's operations come under two main heads, passenger traffic and goods traffic. Passengers, both foot passengers and motorists, and cars are carried on two car-ferries, the Munster and the Leinster, operating between Dublin and Liverpool, and on a third, the Innisfallen, operating between Cork and Swansea. These services are, of course, of vital importance to Irish tourism, offering as they do the most economic means of transport from our main market.

Since the introduction of the company's car ferries in 1968 their carryings have increased spectacularly, for example: Passenger carryings have increased from 360,000 in 1968 to 576,000 in 1975; Car carryings have increased over the same period from 43,000 to 110,000, and the number of wheeled units moved has increased from 5,157 to 27,459.

The company have maintained this growth pattern despite the effects of the Northern Ireland troubles on tourist traffic from Britain and the downturn in the Irish and British economies. In the context of an overall expansion of the market, the company believe that the prospects for continued increase in the overall numbers of sea passengers are good.

The second part of the company's operations is the carriage of cargo. At the present time the B & I operates a container service from Dublin to Liverpool, as well as a weekly service to Rotterdam and Le Havre. Container services entail the use of custom-built container ships, together with elaborate terminal installations at ports. In addition, the three car ferries provide all year round capacity for the carriage of roll-on-roll-off goods traffic. About 12 months ago, the company undertook, jointly with the British firm of P and O, who provided the ship, a roll-on-roll-off cargo service between Dublin and Fleetwood.

The B & I are the major carrier of freight on the Irish Sea, moving almost one million tons of freight a year between Ireland, Britain and Europe. They carry 30 per cent of all traffic on the Irish Sea and this includes exports for onward shipment to many parts of the world. They offer a truly comprehensive service catering for every customer requirement. The most significant development has been in the field of roll-on-roll-off freight, which is growing at the rate of 20 per cent per year. This trend has been accelerated since Ireland's accession to the EEC.

It is significant to note in the context of the company's freight activities that their average price for moving goods has risen by only 22 per cent per ton since 1966 compared with a rise in the Consumer Price Index of 120 per cent over the same period. In actual money terms the average charge per ton of freight carried was £5.13 in 1966 and £6.27 at the end of 1975. When it is considered that these figures ignore the fall in the value of money over the interval, it is very obvious that the real cost of shipping a ton of freight across the Irish Sea has fallen sharply over the period.

Following the economic downturn resulting from the fuel crisis at the end of 1973, the company reorganised their services to match frequency and capacity more closely to current demands. At that time the company reduced their container operation into Liverpool from two ships to one ship and transferred traffic to the new joint service to Fleetwood which the company commenced in April, 1975, in conjunction with the P and O company. This had the added benefit of achieving a significant degree of rationalisation of freight services on the Irish Sea and at the same time allowed the company to provide capacity for increased roll-on-roll-off freight demands.

Two special factors, one adverse and one helpful, may be noted. There is a basic imbalance between the volume of goods conveyed from Britain to Ireland, and from Ireland to Britain. The fact that there is more empty space on eastward-bound cargo ships than on westward means greater competition for traffic on the former —to the benefit no doubt of the Irish exporter, but at the expense of the carrier—while the imbalance of volume also militates against the most efficient use of vessels, containers, pallets and other facilities.

The more favourable factor, from the viewpoint of the B & I, is the growing trend towards roll-on-roll-off traffic at the expense of container traffic. The advantages offered by roll-on-roll-off to the customer have led him to utilise this mode increasingly, despite the higher charges levied, which are more economic to the shipowner. This development is consequently beneficial to both parties.

The B & I were acquired by the Government with the intention that they should continue to be operated as a commercial enterprise and this objective has been adhered to. The development programme undertaken by the board of directors involved the construction of new terminals at Dublin, Cork, Liverpool and Swansea; three new car ferries, the new Munster and Leinster operating Dublin-Liverpool, and the Innisfallen, operating Cork-Swansea; and five new freight ships, the container vessels Wicklow, Kerry, Sligo and Kilkenny and the roll-on-roll-off vessel Dundalk, were constructed. Of these the Wicklow operates Dublin-Liverpool, and the Kilkenny Dublin-Le Havre-Rotterdam, the Kerry and the Dundalk, with Irish crews are on charter abroad, and the Sligo is no longer employed by the company. New road transport fleets and a pool of 3,500 containers and trailers and extensive terminal equipment were required. Staff had to be retrained and new business obtained. Today we see the fruits of this programme: present turnover of the company amounts to £19 million, two-thirds of which revenue is earned abroad; they employ 1,500 people, 1,200 in Ireland; their annual expenditure on goods and services in Ireland is £10 million; their expenditure at Verolme Cork Dockyard since 1969 has been £10 million; their expenditure at Liffey Dockyard since 1969 is £1.4 million.

The company have had an excellent record in the field of personnel relations. They have developed the concept of works councils in their organisation and these now form a real part of their communicating and decision-making processes. In 1975 all the employees of the company, in recognition of the difficulties likely to face the economy in 1976, agreed to defer any increase which might emerge out of any new national wage agreement for 12 months. This would represent an interest-free loan to the company which would be repayable from future profits.

In retrospect it would seem to me that, having regard to the extensive scheme of modernisation which the B & I had to embark upon in the 1960s, the capital resources with which it was provided by the State at the outset were far from adequate, and the company has never really been able to compensate for this initial handicap. If the company is to continue its progress a further allocation of capital is now urgently necessary. The figure of £15 million provided for in this Bill will enable the company's loan/equity ratio to be restored to a reasonable balance and, at the same time, make provision for the financing of a further car ferry vessel. I should make it clear that at this stage all that is being done is that the maximum authorised share capital which the Minister for Finance is empowered to subscribe is being increased by the figure of £15 million. It is the intention that the money will actually be made available in instalments from time to time in this and future years only according as it may be required to meet the immediate needs of the company.

I recommend the Bill to the House.

Mr. Lenihan

In these times of economic difficulties and problems it is heartening to see, as elaborated here by the Minister, a success story under the aegis of the Minister in the form of the operations of B & I since their acquisition by the State in 1965. It was a very important decision largely initiated by the late Seán Lemass as Taoiseach, one that at the time was regarded by many people as an unwarranted gamble. It has certainly paid off in a very substantial way in one particular aspect to which the Minister has referred.

The main thinking behind the State's acquisition of B & I in 1965 was to ensure as far as our sea transportation was concerned that Ireland, as a State, would be in the business and that our rates would be competitive. There is no need for me to emphasise the importance of that for an island trading nation. If the ailing B & I—as it was in 1965—had not been taken over by the State our marine transportation to Britain and Europe would be almost entirely— apart from a few small private Irish coasters—in the hands of outside interests. The main thinking behind the acquisition of the company in 1965 was to ensure that the Irish State would have a stake in shipping transportation and so ensure that rates would continue to be competitive. That has been the situation as far as cross-channel transportation is concerned.

British Railways are continuing in the business and B & I are in the business competing with them. They co-operate where possible and I know there were very advanced proposals for sharing facilities at one stage which have not come to full fruition. However, as far as marketing and the rates which are offered to shippers are concerned there is a strong competitive trading situation which is of immense benefit to Irish exporters and importers and to the country as a whole in ensuring that shipping transportation costs are cut to the bone by reason of a healthy competition between two strong organisations. One organisation—the B & I— is sustained by the State and the other is a British State organisation with whom we have very good relations and who are also providing an excellent service. That is exactly as it should be and that was the thinking that prompted the initial move to acquire the ailing B & I in 1965. The Minister refers to this fact in his speech when he said:

It is significant to note in the context of the company's freight activities that its average price for moving goods has risen by only 22 per cent per ton since 1966 compared with the rise in the consumer price index of 120 per cent over the same period.

This is very significant. The real cost of shipping across the Irish Sea could very easily have been a serious blow to our economy if it was allowed to escalate as it appeared to be escalating in the early 1960s. Since the State, through B & I, have gone into this business, the real cost of shipping a ton of freight across the Irish Sea, as the Minister has said, has fallen sharply over that period when you relate a paper increase of only 22 per cent per ton as compared with a rise in the consumer price index of 120 per cent. It certainly is a fabulous reduction in real terms as far as Irish Sea trans-shipment is concerned.

In actual money terms, to quote the Minister, the average charge per ton of freight carried was £5.13 in 1966 and £6.27 in 1975.

In a ten-year period there is that very minimal rise in freight transportation across the Irish Sea on which we are so vitally dependent: it is the basic lifeline as far as our imports, exports and the economy are concerned. When one has regard to the sort of escalation we have had in the cost-of-living in recent years and the inflation to which we have been subjected, one can see the enormous importance of having this stake in freight trans-shipment across the Irish Sea. The fact that it has been cut to the bone is due to the fact that we are in there competing against another very strong organisation supporting the British end, and the healthy competition has given rise to this very valuable cost competitiveness as far as freight transportation is concerned, thereby facilitating our importers and exporters.

One significant development which was very welcome too, and I do not think it was anticipated at the rate it has developed, is the growth of roll-on-roll-off freight. It is certainly significant that it is growing at the rate of 20 per cent per year. Of course, the EEC entry has helped it. I take it that in many cases the roll-on-roll-off freight across the Irish Sea is going to EEC countries. That is certainly a spin-off benefit from our membership of the European Economic Community. Obviously the most effective way of transporting goods and taking goods back into Europe is on the roll-on-roll-off system. The growth rate of 20 per cent per annum would appear to indicate that and the company are meeting that by switching facilities from container provision to roll-on-roll-off provision.

All of this adds up to a picture of a company in a healthy situation where, apart from the basic essential service aspect and apart from the benefit to the economy as a whole, they are actually making a profit after taking account of loan charges. As the Minister said, there is provision for loan charges also, so that with a net profit of £281,000 in 1974, after allowing for financial charges of £1 million in that year, there will be a profit in 1975 of £139,000 again after allowing for financial charges of £1,400,000. This adds up to a healthy financial situation as well as providing a very competitive service which benefits the country. Therefore, there is no risk whatever —in fact, there is a positive gain as far as the economy is concerned—in the State taking an equity share, which is what is proposed here in the Bill.

I moved the B & I Bill of 1970 and, at that time because of almost a 100 per cent loan capital bond, it was decided to provide for a £3 million limit for the Minister for Finance to take up equity shares. What the Minister is now proposing is that the Minister for Finance may take up share investment up to £15 million. That will be a flexible matter and the Minister for Finance, as requirements arise, will invest that amount of money. It is an absolutely safe investment, an absolute basic requirement, because with a company of this kind showing this sort of success it would be very bad business to have them dependent on loan capital and to find their expansion and adaptation inhibited by reason of raising further loan capital which it could quite easily do. There is an obvious inhibiting impediment from the point of view of the financial organisation of the company in regard to investment expenditure if they are going to be forced into a position of funding future expansion and development by further loan burdens, particularly when the record shows that as far as the Minister for Finance, on behalf of the State, is concerned, he is on an absolutely safe wicket in putting share capital on behalf of the community into an investment of this kind. It is safe from the financial accountancy aspect and it is essential from the point of view of national security and national gain.

I would like to take up one or two points on which I feel very strongly. I was just reading what I said in reply to this debate in 1971 and I think I made a half commitment. We had a report from Bord Fáilte on the matter which had been supported by B & I. It is an old chestnut but it is one that is still valid, namely, the provision of duty free facilities as far as passengers on B & I ships are concerned. We had that report to hand in 1971. I ran into difficulties, and I am sure the Minister has too, with the Department of Finance. The revenue aspect was too strong as far as we were concerned at the time. It would have got support from our Department but the revenue aspect held sway. I wonder would the Minister enlighten us on whether he is pressuring this aspect? I feel he should. We have it on our air services. It would appear to me to be an obvious advantage, particularly in view of recent budgetary——

Dr. West

We do not have it on the air services between here and Britain.

Mr. Lenihan

We should have. When you have it on a number of our airline services it would seem to be even more appropriate to have it on the shipping services where people are together for a longer period of time, where they are captive customers for a number of hours on the B & I ships to and from Britain. Particularly having regard to the budget disparities that have begun to arise since the British budget, it is evident now that our liquor prices are running way ahead of British levels. Surely one attractive way would be to have duty free cigarettes and particularly duty free liquor when you have captive customers. It would be an attraction in regard to getting further passenger traffic on B & I vessels. I know that Bord Fáilte are very keen on this being done. I just wonder what success the Minister is having with the Minister for Finance on the matter. I understand the difficulties involved.

There is one other matter I would like to refer to even though it is not strictly related to the Bill. It concerns small coastal shipping firms and the up-dating of the merchant shipping regulations. I would like to know if any advance has been made on that aspect. I know there was a working party within the Department working on this with a view to updating these regulations which are there since the Merchant Shipping Act of 1893. It puts our general coastal shippers at a considerable disadvantage when they have to observe regulations that are very dated vis-à-vis the requirements on coastal shippers in our EEC partner countries, particularly the Dutch. They have a real advantage here due to a very liberal policy pursued by the Dutch Government in regard to regulations on their coastal shipping. I would like the Minister to comment on that. It is not strictly related to the Bill but it should be brought in here under an updating of the merchant shipping code. It is related to the fundamental purpose of the Bill which is to provide competitive freight transportation across the Irish Sea and also directly to the EEC where we are running a regular container service under B & I into Rotterdam.

I would again like to welcome the measure and to say that it is good to see positive progress in this area. I am glad the Minister referred to the almost model administration and management of B & I. They are one of the best State companies in this respect. They have a very good management team, they have shown a tremendous sense of purpose since the formation of the company and this was evidenced by the voluntary pay pause which they took last year. I am glad the Minister referred to it again. They set an example, where the employees of the company, in recognition of the difficulties likely to face the economy in 1976, agreed last year to defer for 12 months any increase which might emerge out of any new national wage agreement. That, in effect, is an interest-free loan to the company which would be repayable out of future profits. It is the sort of headline that needs to be emphasised, that the whole field of management-worker relations has proved itself over the years. It shows what good management can do when this sort of development can take place with ease and without any pushing between management and staff. It sets the type of headline that one would like to see followed in many other areas of State and State-sponsored services. What I like in particular about it is that these are people who are not in any secure State employment because the B & I are in a highly competitive business. These people have not the security enjoyed by people in other State monopolies. There are certain State monopolies which have an absolute guarantee from a security point of view, both State Departments and State-sponsored monopolies like the ESB. This is a State-sponsored organisation in the most competitive business area in the world, that is, freight transportation, particularly sea-freight transportation. There is a worker willingness, by reason of good management, which expressed itself in the positive way of postponing any pay requirements under the wage agreement in 1975. That is the sort of matter which should be highlighted. That type of good news is not highlighted enough. The Minister has emphasised it and I hope the Press take note of it. It is the type of headline which is badly required at present.

Mr. Russell

I welcome the Bill. It is obviously a necessary measure but, apart from that, it is a very sensible one. It is wrong for any company, whether they are a State-owned company or a private enterprise, to have an imbalance between their loan capital and their equity capital. Loan capital can be a dangerous means of financing any enterprise, particularly if the lenders are too strict in their terms of repayment.

However, we should be alive to the fact that this method of re-financing the B & I could be regarded as a hidden subsidy on a fairly substantial scale unless the equity capital is serviced by some normal interest payment or dividend payment on the amount of equity capital which will be substituted for the interest bearing loan capital which, as the Minister pointed out in his speech, cost £1 million in 1974 and £1.4 in 1975. Obviously, unless the equity capital bears a reasonable dividend, the company will get a fairly hefty subsidy for their operation. I do not object to that in principle, provided we give it with our eyes open. It is a good thing that the taxpayers' money should be used to subsidise a State undertaking in competition, in some cases, with private enterprise.

It was a proper move to take over the B & I a few years ago. Having accepted the responsibility of running the service, the State, with the assistance of the taxpayers, must ensure that they are properly equipped and properly run. I was glad to note in the Minister's speech that there is an obligation on the company to run their affairs on strictly commercial lines. I assume, referring to my earlier remarks, this means that the equity capital will bear a reasonable return to the State for its substantial investment.

In fairness to the B & I it should be said—this was touched on by Senator Lenihan—that they are in a very hot corner as regard shipping services. Irish-British cross-channel shipping is probably one of the most competitive areas in the world, if not the most competitive. Several companies have fallen by the wayside due to the substantial losses incurred. They went into the business at a time of very rapid and significant changes in cross-channel shipping, particularly of goods. The first development was the ferry services and they have now been gradually replaced by roll-on-roll-off which is the sea transport of the future for short sea crossings. It is obvious that between Britain and this country this offers an advantage of a short sea route and also between Britain and the Continent. In the years to come, more goods coming into the country—and hopefully more goods going out to redress the appalling imbalance of trade between Britain and this country —will be carried by the roll-on-roll-off method.

While we applaud this development and note that it is helping to keep down costs to the importer and exporter, and ultimately to the consumer, it must be realised that the lowering of costs between Britain and Ireland in this way is having a very serious adverse effect on shipping from the west and south-west coasts of Ireland.

The profitability of shipping from the west coast to the United Kingdom and to a lesser extent the Continent has now been seriously jeopardised due to these changes over recent years. I am, and possibly other Senators are, only too familiar with this sad pattern in recent years. In the port of Limerick which traded with the United Kingdom, there was a Limerick-Liverpool service for upwards of 100 years, now there is virtually only one somewhat erratic shipping service, mainly to the Continent taking in a south English port. This might be inevitable in the harsh economic sense but it is a very serious development for western ports.

It is also a serious matter if regional development particularly in the west and south-west of Ireland is taken seriously because, without a viable and regular shipping service out of a regional area, the possibilities of industrial development are lessened gravely. For that reason I wanted to avail of this opportunity to ask the Minister if he would arrange for B & I to examine the whole question of shipping from the west coast to the UK and the Continent. It may necessitate some form of State subsidy but, if shipping from the east coast to Britain and the Continent is to be subsidised, a valid case could be made for giving some State assistance to shipping from west coast ports to the UK and the Continent.

If something like that is not done in the immediate future the situation could arise—and is arising—where all raw materials going to the west and south-west of Ireland and exports from there will travel by rail or road, by CIE or haulier, to the east coast and be carried by vessels on this rapid sea transport system to Britain and the Continent. This is a good economic policy from that point of view but it is disastrous from the point of view of shipping out of west and south-west coast ports.

I know the Minister has in hand at present an investigation into the whole question of our port development and its importance to the country in terms of imports and exports as an island nation. I hope the whole question of shipping will be taken into account in the context of the review of the port industry. No matter how efficient shipping between the east coast of Ireland and the west coast of England may become—these figures show it is highly efficient and low cost—it would be a sad day for those of us who live on the other side of the country if our ports gradually became inoperative. That is a point which has concerned not only myself but other Senators over a number of years and the pattern is likely to evolve even further to the disadvantage of west coast ports.

Some years ago—I do not know whether Senator Lenihan was Minister at the time—a committee was set up to examine the significance of transport costs on industrial development in the west. To my knowledge that committee has never reported. It may have reported to the Minister or to a Minister and his Department but certainly, as far as I know, the findings of this committee, if it ever has found, have not been made available to the public generally. It would be interesting to know what was the result of this committee's investigations. It would show a rather sorry tale as far as the west is concerned and its isolation economically from its markets and from where it draws its raw materials.

I can remember many years ago there was a subsidy allowable on freight shipped into Limerick and Shannon ports which disappeared some time ago. We are looking at this matter now from a national point of view because we are talking about a national shipping line. We are not talking about private enterprise. A national shipping line should be used as a vehicle for the development, not only of the east coast, but also the country as a whole with particular reference to the developing areas in the west and south-west. You cannot develop without a viable shipping line, a regular shipping service. That has been proved time and again.

Another point which might sound a rather far-fetched idea at this stage but, we are talking generally about shipping, is that the possibility of a direct passenger and goods line between the west coast of Ireland and the east coast of America should be considered in the not-too-distant future. It may sound astonishing now to talk about shipping passengers and goods, say, from the Shannon Estuary to Boston and New York. This was done less than 100 years ago. It was a regular feature with tiny ships, most of them, unfortunately, carrying emigrants out of the western areas to the United States. The same thing applies to Galway. History has an extraordinary habit of repeating itself over the years. It is not too far-fetched to visualise in the not-too-distant future a shipping line or lines from the west coast of Ireland. Naturally I am interested in the Shannon Estuary in this regard. It has all the necessary natural facilities to provide for ships of almost any size between that centre and the east coast of the United States. It would be well worth looking into. At the moment naturally all our eyes are turned to the east because of our membership of the EEC, but we should remember that we have long trading links with the western world and those trading links should, as far as possible, be encouraged and expanded. We will always be glad of the American dollar for our goods in the years to come.

I do not wish to say any more except to repeat my welcome for the Bill and to ask the Minister to have regard to those of us who live in the south-west and west of Ireland. I believe I made a valid point on the question of having regular shipping services in these areas if they are to expand and develop and maintain and expand their population as we all want them to do.

Dr. West

I agree with previous speakers in saying it was an absolutely correct policy for the Government to purchase the B & I Shipping Line and make it a totally owned Irish State company. I have no doubt it was one of the many moves we have made where private enterprise was unable to supply a particular need and the State stepped in. I am very pleased the Minister has been able to outline the successes the company have had over the years. I also join in the tributes Senator Lenihan has paid to the company not only on their commercial undertakings but on their labour relations. That is a headline, as Senator Lenihan has said, and I hope that they will continue their farsighted policy of consultation with the staff and agreement generally on their terms of employment.

Since we are, in a sense, voting a very considerable sum to a shipping company—I am not opposed to that —we also ought to look at some of the consequences of this large subsidy. It is a subsidy in one sense and it is not in another. It is difficult, with the figures the Minister has given us, to get an overall picture. Clearly the picture is a good and healthy one. It is one of our semi-State bodies which does not get great negative publicity in terms of fare rises and Government bail-outs, and so on, but at the same time, it is a body which could well benefit, and one hopes will benefit, from the scrutiny of the all-party committee which is to be set up to look into such bodies. As I have said on many occasions, such a committee will have facts and figures at its disposal and will be able to get a better overall picture.

One of the things I would like the Minister to tell us is what is the extent of the foreign borrowing the company are involved in at the moment. Could he give us an idea of the rates at which the loans have been made? I believe B & I have extensive foreign borrowing at the moment. I am not clear about the figures. One only gets certain snippets of information from the Press but, like any other company who have borrowed abroad, they are suffering. They have no funds.

Mr. P. Barry

There was a changeover.

Dr. West

A changeover?

Mr. P. Barry

It was a drain.

Dr. West

It was a drain and one of the problems was the decrease in the value of sterling. I know that the company purchased a number of ships from continental builders. Presumably there was some financial arrangement at that time. I think it caused a considerable problem as it has caused to other bodies.

Mr. P. Barry

That is way it was transferred.

Dr. West

I am pleased to hear that. That is one of the problems any such body faces. It is pleasant to have this information that there are no outstanding foreign loans and therefore the B & I company are not suffering from the 22 or 25 per cent devaluation in sterling over the past 12 months.

I should like to comment on two aspects of the B & I service, the passenger service first of all, and then some remarks about the freight services. Passenger services between Britain and Ireland are almost entirely supplied by the two companies, B & I and British Rail. I echo what Senator Lenihan said. I said the same thing to him five years ago when he was Minister for Transport and Power urging him to obtain duty free facilities on these cross-channel vessels. When one steps into the Munster or the Leinster or the Innisfallen the first thing one is met with is a line of six one-armed bandits. If they can put one-armed bandits on the ships and operate them, it is a good sign of the free enterprise world.

It is a great pity we cannot provide duty free facilities. The difference between the air crossing and the sea crossing is that the sea crossing is considerably longer. One has a captive audience, a captive market, in some cases for eight hours and in some cases for ten hours. Duty free facilities would be a considerable benefit and an added tourist attraction. We must not forget the very important part played by B & I in promoting our tourist trade by providing the carriage of people to Ireland to spend money as tourists. That is extremely important and it is important also that we maintain the level of services, that we increase their level and their quality.

I would remind the Minister that, as far as the consumer is concerned, all is not absolutely rosy on these ships. The B & I ships, in a Which survey carried out in 1970 which was concerned with the passenger shipping services between Ireland and Britain, came off the worst. The reason was that the B & I crossings are by far the longest—eight hours in some cases, ten hours in the Cork-Swansea case. There is no problem when the service is by day, but a number of these services are overnight. There is a serious lack of berths in the ships and the Which survey found there was most passenger dissatisfaction with the B & I services because of the lack of berths.

The initial purchases of the modern roll-on-roll-off ships by B & I were from a company that operated a daylight crossing service from the Baltic and the ships were very rarely used at night. They were heavily used for overnight crossings in our case. For example, the Swansea-Cork ship, Innisfallen, can carry a maximum number of 1,200 passengers and the number of single berths is 256. There are also 16 double cabins. The Which survey found that nearly half the passengers could not get the exact booking they wanted, and about one in five found they booked too late to get a berth.

Clearly there is little that can be done with the ships originally purchased. The Minister and the company might bear this in mind when they are purchasing further ships and when they are—and I am very pleased to see it— approaching Verolme for the ship one hopes will augment the Cork-Swansea service or the next passenger vessel they buy, which hopefully will be built by Verolme. They should bear this in mind and try and have the berth-passenger ratio a bit more favourable.

I am a frequent traveller across the Irish Sea and I had the—I would not call it an exhilarating experience— experience of having to spend a night in what is euphemistically termed an aircraft type recliner seat. I can tell you I woke up pretty "shook" in the morning. For many people it is unsatisfactory. Of course, it is cheap. I am not saying there should not be aircraft type recliner seats but what I am saying is that there are a large number of passengers who would pay for berths. They cannot get them, and they have to take aircraft type recliner seats which are considerably cheaper, but not what they want. I hope when future vessels are being designed to be used for overnight crossings, the needs of the passengers will be taken into account.

I realise there is a conflict here because in the former vessels before the days of the roll-on-roll-off service a great deal more space was available for cabin facilities. A whole deck, or perhaps one-and-a-half decks, now go towards providing space for cars and commercial vehicles. At the same time, one feels something more could be done and a better ratio of total number of berths to the maximum number of passengers could be achieved in the ships which are to be purchased in the future.

To turn briefly to the freight side of the B & I operation, Senator Russell and Senator Lenihan pointed out that here we have the situation of a subsidised Government-owned shipping line being in direct competition with our private coastal shippers. I recall in a corresponding debate on 23rd June, 1971, when Senator Lenihan was Minister for Transport and Power, I was in a position to compliment him on his magnificent save on the previous Sunday of a penalty in Croke Park in the game between the Munster Members of the Dáil and the Ulster Members of the Seanad. He paid for it.

Mr. P. Barry

He would not try it now.

Dr. West

I had a few hard things to say about this aspect of the B & I operation, not that I have anything against the B & I operation, but because the position is that here is a heavily subsidised State service competing against three small private Irish-owned shipping companies. What I had to say was not directed against the B & I company but towards the Minister and his Department because the shipping companies not only labour under the handicap of competing with British Rail and B & I which are heavily subsidised State companies, but they operate under regulations which are so archaic as to be laughable. I regret very much that the Minister has not been able to say at any time since 1971 when we made this complaint— Senator Russell and Senator Lenihan referred to it—that something has been done to ease the position of Irish-owned shipping companies.

There are still three private coastal shipping companies in operation which are in direct competition with B & I and British Rail, two based in Arklow and one based in Cork. The Minister will correct me if the figures are wrong. The point is, they operate under the Merchant Shipping Act, 1893. This is UK legislation and the UK coastal fleet operates under the same legislation. The UK coastal fleet never recovered after the war and it is virtually extinct, as is ours. This is an island country and virtually all its foreign trade has to come in by sea. Very little comes in by air in proportion. All the carriage of heavy goods is by sea. We have never got round to developing our own coastal shipping as we should have. As an island nation we should have an affinity with the sea instead of always looking on it as a barrier.

It is sad to record that the few shipping companies which struggle manfully to keep going should have to compete, not only with the subsidy which this State gives to B & I and the British Government gives to British Rail, but with incredible regulations. One of these is that the operating cost is calculated on gross registered tonnage and the figure is 500 gross registered tons. A large number of continental vessels are registered at 499.9 gross registered tons and they pay low charges to our port and docks authorities when they come in. The situation was such that in 1971 three vessels had been purchased by Irish shippers from continental competitors. They had all been registered at 499.9 gross registered tons and when they were purchased by Irish Shipping they had to be re-registered with the Marine Section of the Department of Transport and Power and they suddenly appeared in the registration books at 506 tons, 622 tons and 547 tons, which was their actual gross tonnage. I am not trying to say that our coastal shippers should be dishonest. What I am saying is that they are operating under legislation which is crazy when compared to the legislation under which their competitors, the Dutch, the Germans, the Scandinavians, operate.

Our legislation for coastal shipping is based on geographical location. We say: "You are a home trader; therefore you must not operate outside a certain area. You must confine your operations to a certain small area." The sort of situation that arises is that an Arklow ship taking cargo to Belfast —this happened recently—when offered a cargo for the Canary Islands cannot take it because the Canary Islands is outside this small, confined area. But its Dutch competitor, with exactly the same tonnage, can to it without any problem.

There is no geographical limit on continental vessels. Danish and Dutch ships are not controlled geographically but on the size of the boats. French ships are controlled by the power of the boats, which is an equivalent type of registration. Our regulations are too inflexible.

I checked with Senator Lenihan, to whom I made these complaints five years ago, and I asked him: "Is it the position now that we are all under the same EEC regulations?" He replied that that was not the position. We are operating under the 1893 Merchant Shipping Act. On a number of occasions I have received the most bitter criticisms of the fact that the Department of Transport and Power have done nothing about this. In 1971 Senator Lenihan, then Minister for Transport and Power, said that a committee was being set up to do something to update the legislation for coastal shipping. Five years later, has anything been done by the Department? Can the Minister tell us that within the next six months he is going to bring in regulations which will give our coastal shippers a fair crack of the whip in competition with Dutch and Danish shippers? If he could I would be very happy, but he cannot, and my guess is that the Department of Transport and Power have been sitting on this and nothing has happened. It is a sad situation and I want to raise this in a rather bitter tone because this is the tone in which it is being raised with me by our Irish coastal shipping firms. If something is not done for them they will go out of business before very long.

There is also the problem of the load line certificate. There is the problem of the extension fee for master's certificate which in 1962 was £2; in 1968 it was £16.10.0. If all these fees are going up and if coastal shippers have to pay the increased fees, then it is only reasonable that they should expect to get an increased service from the Department of Transport and Power and that that service should be in the form of updating the regulations. While that is not done their complaints are justified and I want to make them as loud and as clear as I can. One of the shippers said to me, "The Department of Transport and Power regulations make our ships so safe that we can hardly go to sea." That situation still obtains five years later. It is a sad situation and I want to raise it with the Minister to make the point absolutely clear.

It was calculated in 1951—perhaps the Minister has a more recent figure —that £2½ million annually left the country in freight and marine insurance charges on trade with Britain. It must be five or six times that amount now. We must remember that whenever an Irish importer or exporter uses Irish Shipping he is increasing his country's prosperity; when he imports or exports by means of foreign-owned ships he is doing the reverse. There is, on the one hand, an invisible subsidy staying in the country and, on the other hand, going out of the country. There is an invisible transfer whenever we use our Irish shippers. What we should be seeking to do is to provide for them the best possible conditions under which to operate and thus ensure that they are not hamstrung vis-á-vis their continental competitors by unfair regulations.

This problem is going to increase in magnitude because of developments in the oil and off-shore gas business. That is clearly going to provide an impetus for coastal shippers. There will be a lot of transfers. Perhaps some of these big companies will have their own vessels, but there certainly will be extra work for our small shipping companies. This is work that could very well make the difference between survival or going under for some of these shipping companies, and the sooner we have this legislation updated the better.

I remember five years ago hearing that small coastal vessels were not allowed go to sea without a registered cook. I do not know whether that still applies. The people who told me about this said that as far as the Dutch, the Danish, the Germans and the Scandinavians were concerned, every member of their crew could be a registered cook or they might have no registered cook at all but it certainly did not prevent them going to sea. I plead very strongly for greater flexibility in the regulations regarding coastal shippers. They would be happy to accept the situation in which they are competing with heavily-subsidised State companies for their freight traffic if they felt that the regulations which bound them did not discriminate against them in favour of the continental shippers. I hope that the Minister will be able to say that something will be done about it straight away.

The Parliamentary Secretary to the Taoiseach, Deputy John Kelly, wrote a very telling article a month or so ago, complaining that on so many occasions we unthinkingly followed the British pattern in so many parts of our life. We have this in legislation for a good historical reason, but there is no reason why we should continue to accept this legislation without challenging it and without examining its relevance to our present situation. We might say, and it is a sort of blanket argument that is used whenever somebody makes an appeal like this: "Oh, we cannot do anything because we are now in the EEC and there will soon be EEC regulations which will bind us all." That is absolute nonsense. If we take that attitude when we start bargaining with the relevant EEC Committee we will be in a weak position.

We should look to putting ourselves in a strong position while we have this independence which is essential, and then look to making our bargains with the EEC Committee. We should make the most liberal possible shipping regulations and shipping laws immediately, and then, two years later, go into the EEC Committee which will be considering coastal shipping legislation and say: "We are in this position and we do not want to backtrack from it," instead of saying: "We are in a position in which our laws are so outmoded—they are based on British legislation from 1893 —that any liberalisation will do us." We would be in a much stronger position if we do something.

I have harped on this point because I believe it is very important. I hope the Minister will be able to tell us something about the deliberations of the committee of his Department which have been looking into this problem since 1971, and that he will be able to say that some rapid progress will be made.

The gripe the shippers have is justified and genuine. I do not want this rather gloomy, disparaging note to reflect on the B & I Company, which I think have done an excellent job, I hope my criticisms will be accepted in a constructive way. That is the way they are being offered.

When the B & I Company are looking for ships on long-term charter they might well approach our coastal shippers because what a coastal shipper needs is a long-term charter agreement. This would involve in some cases the actual building of a vessel which, one hopes, would be built in Ireland and the purchasing of a vessel, perhaps on loan terms, by an Irish company. If B & I are chartering a vessel it is obviously better because they are a company who are taking a long view and are able to get a long-term picture of their needs. If they know they will need to charter a vessel in 1979 then why not strike up an agreement with one of our extern coastal shippers and say: "If you have a vessel available in 1979 we will charter it from you." It will be an Irish vessel, registered in Ireland with an Irish crew, so the benefits of this commercial arrangement will stay in this country and will not go outside such as happened when our shipping companies have had to charter vessels before.

This is another way in which the State company could help the private shipper by involving the Irish companies in long-term charters. The B & I attitude should be to try to support these companies and work together with them in generating further trade. It is a very competitive but expanding market and one that is not likely to collapse overnight. It is one in which one can be reasonably sure of the volume of trade. It is good to see it expanding and I am sure it will continue to do so.

There is a lot to be gained by the various groups involved—the State companies and the private companies —working together. I hope that what I have said will be taken in the spirit in which it is made. I feel we must look at our private shippers again. I commend the operations of B & I and their success. I hope that the success of this company will not in any sense contribute to the extermination of the private firms working manfully away in this important area.

Mr. Kerrigan

I do not intend to delay the House very long. I join with other Senators in welcoming this Bill. It shows faith in the B & I company. While the main purpose of the Bill is to restore loan equity balance, it is also there towards additional capital costs for the future. This is to be welcomed.

We have to realise that, with the present B & I roll-on-roll-off system, it is unfortunate that some passenger space has to be sacrificed. I welcome the additional vessel which will be put to use on the Cork-Swansea route. I also welcome the prospect of a ship being built in the Verolme Cork Dockyard. This company are entitled to be congratulated on their success. As the Minister pointed out in his introductory speech, the costs per ton have dropped. It is necessary that such an efficient service should be available for tourism and cargo.

The company are to be congratulated on their industrial relations. They have given a headline to other semi-State bodies as well as to private companies. They set up a good decision-making process, and this is very necessary. That arrangement between the workers, the unions and the management has helped keep the company on a sound footing. That can be achieved in any industry if proper provisions are made.

The Bill should be taken in conjunction with the Harbours Bill. I welcome the improvement in regard to share capital and so on. I wish the Minister well and congratulate him on his initiative and I congratulate B & I on their efforts to improve the situation.

Minister for Transport and Power (Mr. P. Barry)

I wish to thank the Seanad for the welcome they have given the Bill today. I always feel reasonably happy coming into the Seanad. I know Senator Lenihan appreciates the difficulties which the Minister for Transport and Power has in riding the tide with semi-State bodies. He had no such advantage when he was Minister. There was nobody there who appreciated his difficulties and he probably got a rougher ride than I get.

The purpose of the Bill is quite simple. Massive investment in new equipment—both movable equipment and on-shore facilities—had to be provided by a company whose capital was far too low for the purpose. That necessitated going into the capital market for loans at a very high rate of interest. As Senator West pointed out, one loan in a continental currency hardening against sterling provided very great difficulties for the company. However, that drain on their finances is now closed; and that loan has been reconverted into sterling and is not affected by depreciation.

When this company were purchased it was absolutely the right thing to do, even though the type of equipment and facilities purchased at the time were out of date and inadequate. No effort had been made to foresee what would be necessary at the end of that decade and through this decade in relation to importers and exporters from this country. The State bought the B & I with this equipment in 1965 and set to run it. An imaginative board and dynamic and hard-working personnel have absolutely changed it from a shipping line many years out of date into an enterprise of which we can all be proud of, which is continually looking ahead to see what the market demands will be and catering for them.

The intense competition on the Irish Sea between British Rail and B & I has had a beneficial effect on our economy because, as I pointed out in my opening speech, it has kept freight rates at, perhaps, an artificially low level from the shippers' point of view. That is to the benefit of the whole economy: both exporters and importers get the benefit of these lower rates which, as two speakers said, have increased by only 22 per cent in ten years as against the CPI increase of 120 per cent in that time. If the B & I were in freight only they could not have continued with these rates which would have brought the company into a very serious position long before now. But because of the expansion into the car ferry service and, of course, the container freight roll-on-roll-off service, profitability has been helped very much.

Accession to the European Communities and the use of the United Kingdom as a land bridge between here and the Continent has helped them very much also. As I already pointed out, the change in the method of moving freight from unit loading containers to roll-on-roll-off has all been to the benefit of the company in that time. If this trend continues the company should be, because of the high level of passenger handling and the extra ship which they will have in 1978 operating between this country and the United Kingdom, in a much more dominant position on the routes between here and the United Kingdom.

As Senator Lenihan said, there is great room for friendship and co-operation with British Rail in this regard. I would hope that B & I would continue the close co-operation they have with them in everything but price. The competition should stay and should still be keen in the cost of shipping, but in the use of facilities and the correct blending of their runs —so that they do not directly compete with one another at the same time and on the same day—they can jointly provide a continuous flow of vessels across the Irish Sea, to the benefit of the importers and exporters and the tourist industry in this country. If the Government of the day had not purchased the B & I I would not like to think what the cost of movement across the Irish Sea would now be or, indeed, the quality of the service which would be available. That action was of great benefit to the economy.

Senators Russell, Lenihan, West and Kerrigan referred to the duty-free position. I can tell Senator Lenihan that, as far as the line-up of forces within the Government service is concerned, the position has not changed since he was Minister. There has been constant disagreement between the Revenue Commissioners and the people who advocate duty-free in regard to the probable cost to the country. The Minister for Finance at my suggestion, having met B & I, Bord Fáilte and Aer Lingus has set up a committee comprised of representatives of those companies and of the Revenue Commissioners in order to get the facts and to make sure that they are all in agreement on what the benefits and what the drain would be for the economy. They will report to him, I hope, very shortly and he will then make a decision on the basis of that report.

Senator Russell spoke of the necessity to service the capital now being invested in B & I. Of course, I hope that that would be the position. However, I would not lay it down as a condition this year or next year, or even maybe the following year, that this should be so because they have to catch up on the position of imbalance that has obtained for a number of years. But I would certainly feel that the mandate given to B & I when they were taken over by the State should still hold and they should operate commercially in the full sense without the damage to the small shipowners Senator West talks about and without coming back to the Irish taxpayer looking to be subsidised.

The concept of semi-State companies in this country is some 50 years old now. There has been, perhaps necessarily, tension between what the Oireachtas would wish them to do and what their role should be in the market-place. We all the time have them on bits of elastic-one Government or Minister drew them in, brought them more under control, and perhaps interfered with their progress; another Minister gave them a completely free rein, allowed them to operate commercially and tolerated the egg which he might sometimes find in his face. My approach to them is pragmatic in as much as I agree that they should operate commercially, that they are there for the benefit of the people. My relationship with each one of them changes according to the company involved. They have been of great benefit to the country.

Dr. West

Hear, hear.

Mr. P. Barry

It would not be possible to define the very necessary restrictions that have to operate in the civil service in regard to the formation of companies of this nature. They operate in fields where private enterprise could not afford the capital. Indeed if some private companies were foolish enough to buy some of the things these companies have to buy, they could not afford to keep running them and they would be closed down long ago. There are many things that private enterprise does very much better and which the State should never touch; but there are very obvious things like the generation of electricity, the running of railways, the flying of airlines and so on where only the State can do it. We should be thankful to all these companies because, from the time the very first one was set up, the ESB, the country could not have progressed at the rate it did without them and without the underpinning they gave to the Irish economy.

Senator West and Senator Lenihan spoke about the 1893 Act under which most Irish shipping operates. I am glad to tell Senator West that while I could not promise him the amending legislation within six months because that would be August or September, I will try to have it in this year. There has been a lot of work done on it and many of the points that he raised were raised also by the Irish shipowners when they came to see me ten or 12 months ago. I asked them at the time if they would provide me with one or two members to go on the committee to get their point of view over to the Department. I am sorry to say that they have not done that. I would very much like them to have some say in it because they are the practical people operating in the field.

Dr. West

Is the offer still open?

Mr. P. Barry

Yes. I would be very glad to have them on it. This is a very specialised area and these are virtually the only people with the experience of operating small coasters. I would adopt the attitude to them that I sense behind Senator West's words, that an island country like this could have a large number of small, profitable shipping companies, not just trading around the coast, but tramping all over the world, which another Irish company has so successfully done outside this country, that is, Irish Shipping. I would hope that some people would see the rewards to them in investment in small ships as the Dutch, the Danes and the Norwegians have done and from which they have made a very profitable living.

Senator Russell referred to the subsidy for the west coast and said there had been one there but that it had been withdrawn for some reason. I understand what happened was that there had been a conference which gave preferential rates up to the sixties, and when this conference broke down the preferential rates disappeared. It was not a question of a withdrawal of the subsidy, but the breaking down of the conference at the time.

I share Senator Kerrigan's welcome for the building of the ship in the Verholme Cork Dockyard. This will be, not a substitution vessel, but an additional vessel which shows the company are expanding. It will mean that two ships will now run on the longest run operated by a car ferry by B & I, that is the Cork-Swansea run. To get the benefits of the tourist season B & I will want delivery of that in 1978. If the dockyard, for any reason, are not able to deliver that until June, July or August, B & I would not be interested in taking it until the following year because it would be a drain on their finances over the winter of 1978.

Senator West asked that we have a different passenger bunk ratio on the Innisfallen. I believe it was not for the reason he stated that the vessel was purchased from people who operated mostly day sailings as against night sailings. The best assessment that B & I could make from market research in the last 12 months as to what the balance should be—obviously that is a balance over a span of time and in any one sailing it will not work out absolutely correctly—was a ratio of 1,500 passengers to 400 berths.

Dr. West

That is a better ratio.

Mr. P. Barry

It is, but not much better. B & I have done research on it and this is the ratio which they feel is correct.

Dr. West

It is better mathematically because the probability of maximum passengers on a sailing is small. For the average sailing it is considerably better.

Mr. P. Barry

To get the maximum passengers at peak periods it is not going to work. The people who want berths will not be able to get them unless they book very early. The Seanad might be interested to know that this ship will take 350 cars or 39 40-foot trailers; there will be 1,500 passengers, beds for 400 and seats for 1,000, and it will be capable of doing 20½ knots.

Mr. Lenihan

It is up nearly 50 per cent.

Mr. P. Barry

Yes. The Seanad might also be interested to know that British Rail are putting on a bigger ship also on the cross-channel route here to cater for the tourists. The shipping interests are showing their confidence in the future of this country as a tourist destination and the amount of trade that can be got here for shipping interests in the future.

Again I would like to thank the Senators for welcoming the Bill. I did not anticipate otherwise because I know and all members of the Oireachtas have an appreciation of the difficulties, the problems and the value to the country of semi-State bodies.

Questions put and agreed to.

Agreed to take remaining Stages today.