Seanad Éireann debate -
Thursday, 29 Oct 1981

Vol. 96 No. 5

Irish Telecommunications Investments Limited Bill, 1981: Second Stage.

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

Minister for Posts and Telegraphs (Mr. Cooney)

The primary purpose of the Bill is to provide for guarantee by the Minister for Finance of approved borrowing and leasing by Irish Telecommunications Investments Limited.

The company were set up by my predecessor under the Companies Acts in April 1981, in furtherance of the policy of privatisation of investment in infrastructural services. The primary function of the company is to obtain from the private sector, either by borrowing or leasing, up to £100 million of the £221.8 million required for the telecommunications development programme in 1981 and such other sums as might be required in subsequent years to finance telecommunications development. The company expect to meet or almost meet the target figure for 1981.

The raising of money by the company would be greatly facilitated if approved borrowing or leasing arrangements they propose to enter into could be guaranteed by the Minister for Finance. The Minister for Finance may issue such guarantees only if he is statutorily empowered to do so. No such statutory authority exists in the case of Irish Telecommunications Investments Limited.

The present short Bill is designed to correct this. Sections 6 and 7 provide statutory authority for the Minister for Finance to guarantee approved borrowing and leasing by the company and provide that borrowing and leasing by the company will require the consent of the Ministers for Finance and Posts and Telegraphs. There is nothing unusual in these provisions. In the case of the vast majority of State-sponsored bodies there are legislative provisions of this kind.

Sections 1 and 15 are standard for most Bills. They deal with definitions of terms used in the Bill and short title of the Bill. Section 14 provides that the costs of administering the Bill will be borne by the Exchequer.

The Minister for Finance may take up shares in the company, under section 2; dispose of shares as he thinks fit, under section 3; exercise the normal rights of a shareholder, under section 4; and he must pay any dividends received into the Exchequer in accordance with section 5. Any alteration in the memorandum and articles of association is subject to ministerial consent under section 8. The company are prohibited under section 9 from issuing shares in the company except with the consent of the Ministers for Finance and Posts and Telegraphs.

Section 10 provides for submission of audited annual accounts and a report by the company which must be laid before both Houses of the Oireachtas by the Minister for Posts and Telegraphs. Section 11 contains the usual prohibition on Members of either House of the Oireachtas or of the Assembly of the European Communities from being directors of the company or working for the company while they are Members. In order to preclude any Exchequer subvention for the company section 12 requires the company to meet their costs from their operations.

Finally, section 13 provides for exemption from stamp duty in the case of property vested in the company.

Irish Telecommunications Investments Ltd. will operate as an independent entity under this Bill as enacted until a State-sponsored body for telecommunications is set up under legislation, the draft of which I expect to introduce in the Oireachtas during this session. This draft legislation will provide that the ownership of Irish Telecommunications Investments Ltd. will be vested in Bord Telecom Éireann — the new telecommunications company which will then be responsible for arrangements necessary in connection with the financing of development of telecommunications services. Irish Telecommunications Investments Ltd. will probably retain their separate identity and become a wholly-owned subsidiary of Bord Telecom Éireann but this would be a matter primarily for decision by the board of the new company. The draft legislation setting up Bord Telecom Éireann will also apply to any subsidiaries of Bord Telecom Éireann. It will accordingly provide for repeal of this Bill, if enacted.

The enactment of this Bill at a very early date is necessary if Irish Telecommunications Investments Ltd. are to complete negotiations for the raising of almost £100 million in sufficient time to help to finance the 1981 telecommunications development programme.

While I do not want to appear to inhibit Senators in any contributions they may wish to make to the debate, I would be grateful if they would agree to leave over until another time general issues related to the telecommunications service. The service was considered in detail when the Telecommunications Capital Bill, 1981 was before the Seanad earlier in the year. A further opportunity to debate policy and development plans for telecommunications will be available when the Bill dealing with reorganisation of the postal and telecommunications services is being considered. As I mentioned earlier, I expect to introduce that Bill during the current session.

I ask for the co-operation of Senators in ensuring a speedy passage for this short Bill which I commend to the House.

Professor Hillery

I should like to extend a warm welcome to the Minister to the Seanad. This is his first occasion here since his appointment as Minister. When he was a Member of the Seanad he was a highly competent and respected Leader of the Opposition.

I extend a warm welcome to this Bill. It underlines the policy of privatisation of investment, as the Minister said in his statement, in infrastructural services. This approach provides the key to the telecommunications development programme and will provide a continuity of funds for that development. The Bill furthermore will ease the demands on the Public Capital Programme for funds. Telecommunications are obviously vital for economic and social development. Various business surveys which have been undertaken have underlined that an inefficient telecommunication service is one of the major obstacles to our industrial development. The bulk of our overseas industrial investment comes from the United States where they have a superb telecommunications system. As I understand it, foreign investors attach great importance to a highly efficient telecommunications system in making their investment decisions. Therefore, in terms of job creation and development generally, this Bill fits appropriately into a programme of progress.

The approach marks a new departure. It is an example of combining public and private investment for economic and social advancement in a pragmatic and sensible fashion. I welcome the Bill and wish it a speedy passage through the Houses of the Oireachtas.

Mr. Blennerhassett

I congratulate the Minister in bringing this Bill before us at a very early stage and I congratulate him also in coming to this House. He was here during the past four years as Leader of Opposition and we welcome him here today as Minister for Transport and Minister for Posts and Telegraphs.

We are asked today to sanction up to £100 million to be made available to the company who were set up in April 1981. No doubt this money is needed to develop telecommunications in 1981. Telecommunications are very important. It is important that we have this system running very smoothly because in these times our telecommunications system must be in top gear. This is not the place or time to discuss the service generally. It is right and proper that we give this Bill a smooth run and have the money sanctioned, financed by the Exchequer and guaranteed by the Minister for Finance. I welcome the Bill.

Dr. Whitaker

I am in favour of the Bill and I should like to abide by the Minister's request and confine my observations purely to the financial aspects which are dealt with in this legislation. There are some points on which I should like some further information. I see that the Minister — perhaps in the light of his experience on the Joint Committee on State-sponsored Bodies — has built a wall for himself against any claims that might be put forward for heavy State subscription to the capital of this company. He has set a limit of £100 which will not break anybody. One must ask oneself if that represents a conversion by the Minister to the viewpoint which I expressed here that the Joint Committee had misdirected themselves in listening so much to the arguments put forward by very hard-pressed State-sponsored bodies about the equity-debt ratio. One after another they came before the Joint Committee and argued that they should be treated like private companies and that it should be accepted that a 50:50 ratio of equity to debt was the right thing for them. They did so not because they were able to establish that they were on all fours with private companies that were doing well, but simply because they regarded the burden of interest they had to pay on their borrowings as being monstrous and inequitable and they wanted to shift it to the Exchequer. In other words, they wanted to put a much better face on their accounts and performance than was justified in fact.

I welcome, therefore, the restriction self-imposed by the Minister on the amount of money that the State can invest in the shares of this State-sponsored body. The authorised capital of the body is not mentioned anywhere in this legislation. I do not know how large it is, how much private investors, if they were so minded, could invest in shares in this undertaking. There is no mention of any limit on authorised capital. The only thing that is said is in section 9:

An issue of shares of the company shall not be made unless the Minister for Finance, after consultation with the Minister, has authorised the issue.

That means that the so-called "privatisation" is on the face of it taking a very limited form. It is apparently not envisaged that privatisation will involve subscription of shares or any participation in the profit or loss-making capacity of this enterprise. I know that losses, at least as far as words and statute can so provide, are provided against by the restriction the Minister emphaised, the provision that they must cover the costs of their operations. If in fact, private subscription of capital is to be limited to the provision of loans and to leasing arrangements, and if in fact these have to be guaranteed by the Minister in order to attract them, one is entitled to ask what is the particular benefit of "privatisation"?

Senator Hillery a moment ago mentioned the attraction of private money into this particular form of State enterprise as if that was going to bring a net benefit to the State Capital Programme. He knows as well as I do that there is a limited pool of savings. If some of the stream is attracted into this particular enterprise, then it is going to be all the more difficult for the State to raise it for other parts of the State Capital Programme.

I am really bound to ask whether there is any particular advantage in providing by this special legislation for a means by which the private sector can subscribe to State-guaranteed loans? They can do that without any legislation. They can do it anonymously. What is the advantage of doing it in this form? In what way does it bring anything into the Exchequer that could not be got in another way? I have to ask that because, if the ideal of privatisation is to have any real success, there must be access for the private investor to something more than he can get anonymously by subscribing to a national loan or taking up Government paper. Can the Minister, or will he, give them any share in the good fortune of this enterprise and if so in what way? Telecommunications has a good reputation for paying its way and that is being shored up by the provision in this Bill that it must do so. But is the State going to do more than that? Is it prepared to offer any incentive to the private investor to treat this as if it were an attractive investment offering prospects of return over and above those offered by the ordinary national loan or State investment?

Mr. Fallon

I welcome this Bill. Coming from the town of Athlone where the Minister resides I feel that I should contribute to the Bill. Not that what either the Minister or I have to say will make front page news on our local paper because it is not that type of Bill. For that reason I am glad that the Bill's passage will be a very tame one. I would like to take this opportunity, as other Senators have, of welcoming the Minister on his first session in the Seanad.

In so far as this Bill is concerned it represents a new approach to the innovation by the previous Minister for Posts and Telegraphs, to ensure the long-term financing of this important programme. I am wondering whether, since the company are wholly State owned they could not proceed in the same way as other companies, such as Irish Steel, and not have to be ratified by the Oireachtas. That is something on which the Minister might comment. I believe that this five-year development programme is important to the future of our country. The Minister and officials in Posts and Telegraphs would have to welcome any additional funds into the system. That is what this Bill will do. It will now be a mixture of State owned and private owned, and this should be seen to be very desirable. All levels will benefit from this provision — county, regional and national.

Firms such as Ericsson in the town of Athlone, Telectron and many others in this field of telecommunications will benefit in a practical way from this Bill. It is in all our interests that this legislation is passed and the money provided so that we can get on with this important work for the future development of our country.

Mr. Ferris

I, too, should like to welcome the Minister. He is obviously quite fond of this House. He has been here as a Minister, he has returned as a Senator and now he has come back again as a Minister but we welcome him under any hat that he wishes to wear. I hope he wears his present hat for some time.

There are some fundamental provisions in this Bill that we would like to have discussed on Committee Stage. It is obvious that this is just an enabling Bill. It enables the Minister to do certain things arising out of legislation that was put through the Houses of the Oireachtas by his predecessor. It is impossible at a time like this to unscramble a scrambled egg, so to speak, but we may have some reservations about it.

We realise the importance of telecommunications as a fundamental part of our infrastructure particularly for industrial development and through the workings of the IDA in trying to ensure that industrialists can see in Ireland an opportunity for investment. Telecommunications is a vital part of that. I will abide by the Minister's request not to go into the whole area of the provision or lack of provision in the country under successive Governments, of a proper telecommunications infrastructure. However, I would like to put on the record of the House our party's realisation that telecommunications are very important. Telecommunications should not be hived off to anybody outside the realms of the Houses of the Oireachtas and the Government to ensure that there is a proper telecommunications service. We welcome monetary assistance from anybody for this purpose. Both we and the previous Government have had to borrow a lot of money to run essential services. On principle I have no objections to the private sector. They have been given, as Senator Whitaker said, a guarantee, as if this was a loan to the Government, to ensure that there is a proper telecommunications infrastructure.

I would not have any worries with the existing Minister under subsection (5) regarding his holding the shares of this company for as long as he sees fit and to sell such shares after consultation with the Minister for Posts and Telegraphs. The proceeds of such sales are to be paid into the Exchequer. I would hate to think that having passed an enabling Bill like this that a Minister would then dispose of all the country's interests in this company and pass them to some private speculator who could then make a lot of money. After all, this is one of the State sectors which is capable of making money. It has made money in the past and is capable, with a proper infrastructure and proper development along the lines outlined by the Minister in his opening speech, of making money in the future. I should not like this or any Government to be instrumental in handing over the functions of an organ of the State to the private sector when the commitment to the development of industry is the responsibility of the Government. They should maintain the power and the link over all the infrastructure that goes into the provision of all aspects of infrastructure in this country. Telecommunications are no exception.

I accept that we will have an opportunity of speaking about this when the Minister brings before us his further legislation about the semi-State body for telecommunications. He has promised us that this draft will be introduced to the Oireachtas during this session and that then it could accordingly provide for the repeal of this Bill. Under those terms we would agree to the passing of the Bill today enabling the Minister to carry out the functions envisaged under the Bill which was passed in April 1981.

Mr. D. Kiely

I should like to speak briefly on this Bill and also welcome the Minister. I come from a rural area where we still have local exchanges and where one must get three different operators in order to make a call. This Bill is very necessary in view of the fact that we are trying to attract industry to the country. The first question potential industrialists ask is how adequate is the telecommunications system in the area. Business is lost through bad telecommunications services. This is why all exchanges should be automatic in the near future. I should like to compliment the former Minister for his foresight in realising the need for a service like this. Down through the years we have been criticised for our telephone services.

Regarding Senator Whitaker's remarks about it being financed from the private sector, the success at the end of all this is that the service will be fully automatic by 1984.

Mr. Quinn

I rise to speak largely because of a certain sense of confusion that may have arisen partly because of the use of a particular word by the Minister and certainly because of the contribution of Senator Hillery.

I am delighted that the former Governor of the Central Bank and former Secretary of the Department of Finance set the record straight in technical terms and with the clarity he commands. There is nothing private about a State guarantee that gives to any prospective investor absolute copperfast gilt-edged security to any proposed capital that they would venture into this area. I would suggest respectfully to the Minister, purely in the context of what is essentially a financial enabling measure, that the word "privatisation" is a jargon word borrowed from the doctrinaire rite in England and used with a certain degree of public relations skill by the former Taoiseach, Deputy Haughey.

As Senator Whitaker pointed out, it means nothing in terms of how the English language dictionary might describe it. There is nothing private about raising capital in this form and underwriting it with a guarantee which the Minister is now seeking the consent of this House to turn into law.

I believe also that we are being graded with the false suggestion that in some way a State company might be financially risky and that the attraction of private capital is an attractive alternative to the endemic loss-making activity of a State company. There is ample evidence to suggest, not just in this country but in many other countries, that a modern, efficient telecommunications system is self-supporting and self-financing provided that the politicians allow a proper market pricing system to operate and not succumb to the kind of pressures that forces the financial controller or director of such a telecommunications company to reduce the prices below the level of the cost of servicing the capital that has been borrowed.

I share with Senator Whitaker his concern for the fact that there is a limited pool of available capital and I would hope that embodies initially in enabling legislation confirmation of a package of borrowing that is ready to be taken up. The Minister might indicate what other potential sources of untapped capital, as distinct from a banking consortium or groups of foreign or domestic investors, both public and private, could be available if this State and this House are going to underwrite the sort of guarantee that we are being asked to underwrite. In particular I should like to make reference to the possible role of pension funds in funding some of the capital infrastructure of the telecommunications industry.

I would suggest, in conclusion, that the word "privatisation" is a diversionary word, as Senator Whitaker has more amply and more accurately pointed out. It is a misnomer and it should be removed from future references by the Minister to this legislation.

Mr. Leonard

Speaking on this Bill I should like to congratulate the Minister on his appointment and to say that I welcome this Bill. It is important if we are to secure the continuance of this five-year programme and it is important, too, that this contribution would be made available to the private sector. This programme should not be impeded in any way by any financial restraint. During the past number of years when this programme was mooted there was a structure set up and there was recruitment into the service of very many young school leavers who will be in a position to contribute in the field of technology over the next number of years.

This programme has given hope to areas far from the city, in constituencies such as my own where many of the towns still have not got STD or direct dialling. We have found over the years that in some instances it is practically impossible to attract any major industry because we have not got the proper telephone and telex systems. There was a new ray of hope in this regard during the past number of years. We have the change in approach in dealing with applications and I hope this will continue. There may be friction in areas where applications are not taken strictly in rotation but I hope that the present system will continue and that there will be no reversal to the type of leapfrogging that occurred from area to area in the past merely in order to adhere to the strict rotation principle.

The £100 shares were imposed when the company were set up by the former Minister, Deputy Reynolds. It is very important to have long-term planning and also long-term financing, in such a massive programme rather than have the finance available on a year to year basis. It was typical of the man who set up this five-year programme, Deputy Reynolds, that he approached it not from a political viewpoint but from a successful businessman's viewpoint. This will be very obvious in the years to come. I hope that road that he choose to travel at that time will also be travelled by the present Minister. It will be of terrific benefit to this country.

Mr. Staunton

I should like to comment briefly on this Bill which I welcome. It is, as the Minister has stated, to enable the Minister under its terms to underwrite, to guarantee the private investments which are sought under the Bill.

I welcome the mix of public and private funds in the telecommunications development because it has been a sector of public life in this country which has been starved for capital for a very long time. Unitl recently we have had one of the worst telecommunications systems of any developed country in the world. There are still immense problems. For that reason I welcome this pragmatic approach without getting into any philosophical argument about the private or the public nature of it. It is not private participation, as Senator Whitaker pointed out, in terms of private involvement in management or anything like that but it seems to me very sensible to seek investment from private sources. The effect of that investment, if it is forthcoming, will be to supplement very substantially the State investment in the system.

In a country which is starving for development funds and where there is certainly a limited pool of capital available to the Government of the day, if one can supplement funding by the State by private funding, then one can fairly dramatically step up the level of investment in any facility. If at this time it is possible from private sources to have an investment of up to £100 million out of a total of £222 million, it is obviously going to gear us for a much more substantial level of development than would otherwise be the case, having regard to the competition for State funds from so many public sources.

The guaranteeing by the Minister of the borrowing is merely a statutory business which is quite similar, I understand, to what happens in many of the semi-State companies. In terms of this telecommunication development I appreciate the work that is being done and the substantial level of investment which has been going into the service during the past seven or eight years or so. Having said that, there are still major problems. We still have a large proportion of this country operating on manual exchanges. We still have simple problems like those of us who have to work in the city, for example, phoning our county which is on manual exchanges. We have the very bothersome business of trying to get an operator to answer a telephone in Dublin. This is a major problem. One can dial 10 in this city at great length without getting assistance. It means going to the supervisor at some stages to request that we are put through. This should not be happening. I do not know if this is any part of major infrastructural investment because I think we are talking about personnel in this instance and about a sufficient number of people manning the manual exchanges in order to provide one with the courtesy of a reply. The service is much better in smaller towns than it is in Dublin in regard to dialling 10. This is something that we should try to remedy. I understand that later in this session we will be having a more substantial debate on this area of telecommunications.

I welcome the Minister to this House. It was my pleasure to serve through the four years of the last Government under his Whip which was unrelenting but I am glad to see him here as Minister.

Mr. O'Connell

I welcome this Bill as an instance of the Minister's determination to press ahead with the programme he has in mind and press ahead with the Government programme in general in this very important area. He has said that he will provide us with an opportunity to talk about the details of the system at a later stage. I welcome that very much.

It seems to me that the main purpose of this Bill, so far as I can understand it, is to provide essential moneys so that the work can be pressed ahead with at the earliest date possible but I should like to express some concern about the question of privatisation which has been mentioned already by Senator Quinn and by Senator Whitaker. Senator Quinn explained to us that this is a problem of the use of the English language. The word "privatisation" is one of those words that has come into the English language and which has a specific meaning. It means, to many people, a transfer of public resources, public organisations, public interests to private interests. Whereas we understand clearly that this Bill is an enabling Bill in order to provide moneys so that work can be proceeded with at present, I should like to put on record my concern that the policy of privatisation of investment in infrastructural services as mentioned here is something which has to a certain extent crept up on us without our discussing it in any great detail or discussing the basic principles which are at issue. It seems to me to raise the important question as to the role of the public sector — the question of semi-State bodies, the whole question of the division between the private sector and the public sector and the basic philosophy which we should have in mind when we are approaching these matters. This seems to be a financial Bill. I hope we will have an opportunity later on to discuss this type of matter in greater detail. We should not proceed without great care into an area in which we start whittling away at the whole structure of semi-State bodies which have, by and large, served this country well and which to many of us might be preferable as a matter of principle to a total, with Senator Quinn's permission, privatisation of what goes on in this country.

Mr. J. O'Leary

Those on the other side of the House seem to consider this to be an occasion where they can tell us about the very fine Minister they had. I am sure he is an excellent man. This Bill is tidying up a legislative procedure which should have been undertaken when this company was established. The obvious deficiency is that the Minister did not have the authority to guarantee on foot of the borrowings of that company which obviously would present a considerable problem when the paid-up share capital of the company was only £100.

The question of the amount of money which it is intended should come from private sources this year has been dealt with by Senator Whitaker. All this Bill is doing and all this company has been doing so far is to depress the amount of Government borrowing so that a good face could be put on the budget last year. That is the reality of it. It has nothing at all to do with privatisation or the ownership of the telecommunications network of the company by anybody other than the State. It is merely a method whereby, instead of the Minister borrowing the money, he got a company to borrow it. Therefore it did not count as Government borrowing. It came under the heading of public sector borrowing. Basically this is only a method of raising public money. I would be very worried if I felt that the Minister was not going to own all the shares in this company in the immediate future. Obviously the Minister is going to own the shares in this company in the immediate future. The life of this Bill will be very short anyway.

I am sure the Minister will confirm that when he will be guaranteeing sums up to £350 million — the actual amount will probably be considerably less than that — he will be in total control of the company and while he will be able to sell the company eventually, obviously he would not sell the company while still continuing to give the guarantee. That is the confusion which has arisen with regard to the Bill — that the power which the Minister will have and the way in which he is going to exercise that power are two different matters. I presume the Minister is going to retain the 100 per cent ownership of the company as long as the guarantee exists. If you are genuinely getting into the area of divesting the State of ownership of some of the needs of telecommunications, there is no reason in the wide world why the other shareholders should not equally guarantee whatever venture was agreed upon in this House and by the Government at that time. It is worthy of note that we on this side of the House do not feel committed in principle to that long-term objective at this stage. Certainly we will discuss it.

I have a technical problem with regard to section 8 of the Bill. That is an unwelcome development in that it overrules the provisions of the Companies Acts of 1963 and 1977. It seeks to make a law that the change of the memorandum and articles of association of this company cannot be done except with the consent of the Minister for Finance and, where appropriate, the Minister for the Public Service. This problem may not arise, but anybody doing business with that company in the immediate future would not be aware of this. There would be no mechanism by which he would be aware that this restriction was placed on the activities of that company which is an ordinary company registered under the 1963 Companies Act. If, as any prudent borrower would, he looked at the document files in the Companies office he would not find any note there of this restriction on any change in the memorandum and articles of association. The Minister should consider making a change in the memorandum and articles of association and writing in the provision of this section so that those people who are doing business for the company would be aware that this restriction exists.

Mr. Carroll

In lending my support to this enabling legislation I will echo a lot of what my colleague Senator O'Connell said. I respect the Minister's request that we do not engage in any broad discussion on the whole telecommunications service at this time. This is not the time when we should be spreading our wings on the topic but I welcome the assurance in the Minister's speech that we will get the opportunity to delve into that in greater detail.

It is imperative that we support this Bill at this stage so that the necessary moneys are made available or can be secured to enable the programme for 1981 to be put in hand. Of itself that would generate a certain activity in the economy which can contribute at this stage to employment development. Now more than ever we need some encouragement in that field and that is one of the main reasons why I lend my support at this stage to this enabling legislation.

I am influenced also by the statement of the Minister that Irish Telecommunications Investments Limited will operate as an independent entity under the Bill until a State-sponsored body for telecommunications is set up under legislation. The Minister went on to state that he hoped to do this during the current session. When that legislation comes before this House and the Dáil we will have the opportunity to debate in some depth the whole question of privatisation irrespective of how that is to be interpreted. As an original nominee of the Irish Congress of Trade Unions I have to say that the ICTU view with a jaundiced eye any handing over of the public service to the private sector in a manner which would enable that service to become a plaything or a pawn in the power of the vested interest group who might hold the community to ransom at any time for a specific purpose. When you talk about the telecommunications service you are talking about a very important element of our whole social, cultural, political and economic set-up. I am lending my support to it but I hope that when we get the proposed legislation before us dealing with the setting up of the new State-sponsored body we will be able to delve into this question much more deeply and express more clearly our reservations, whatever they may be, about the functions of Irish Telecommunications Investments Limited as a subsidiary of that new State-sponsored body.

Minister for Posts and Telegraphs (Mr. Cooney)

I thank Senators for their cooperation with my request for a rather confined debate which I appreciate. I am sure they understand my reason for that request now, having regard to the serious matters which were touched on in the course of the debate, any one of which could give rise to a separate debate. As far as I can I will take up the points made. Some of these points could be the proper subject for a separate debate by this House. For example, what is the role of the semi-State body? Are they to be isolated to a commercial end or are they to have a social end? How are they to be financed, and so on?

First, I thank Senators who welcomed me here. We had a pleasant time here in the last four years and no doubt the present House will have an equally pleasant time for the next four or five years. I look forward to coming back here reasonably quickly. I corrected Senator Hillery wrongly when I said it was not my first time here. I had the unique experience in the last House of being present both as a Member and in a ministerial capacity. That was what confused me.

When introducing the Bill I should perhaps have given its context in greater detail and so clarified the position for some Senators. Senator O'Leary has put his finger on the reason for this Bill. The reason essentially is that the private company who were set up could not do what they were set up to do legally because they could not give a guarantee for the money. Only a nominal capital of £100 was provided in the company. Without a ministerial guarantee nobody would lend the type of money that they were seeking, but where was the power of the Minister to give that guarantee? Some legal debate took place on this matter. Differing legal views emerged and the stronger view has been preferred eventually and has resulted in this Bill here today. Not even a letter of comfort could be given without having the statutory power, in other words the power from the Oireachtas. That is as it should be. The company were set up in pursuance of a policy set out in the public capital programme for 1981 which used the happier form in the English language than the word "privatisation", which is a piece of shorthand not entirely suitable and which has the overtones to which Senator Quinn referred. The public capital programme used the term "private sector participation" which is much more active and is what this is all about.

The intention was that funds which might not be available directly to the Exchequer could be tapped for investment in infrastructural matters such as the telephone service. I take the point that there is just the one pool of money in the country but there are different streams within that pool. It does not follow that this money could be as easily available or easily get-atable if it was all to be got in the orthodox way. People for reasons of their own might not want to invest in gilts at a particular time. Funds under the control of a person might be available in some other way. It is to provide for this diversification of investment that it was felt, and properly, that a different type of approach should be made. We all know that in the private sector people who are managing large funds like to be able to diversify them. We could argue as to whether the diversification is merely nominal but I think I will be able to show that in this case it will be a real diversification because we are providing here an opportunity for the start of direct investment of some of these funds into an infrastructural service.

As I indicated this Bill is only a temporary measure until such time as the new Bord Telecom is set up. An Bord Telecom will be an independent State-sponsored body. They will be a company the shareholding of which will be owned by the State, and all their assets will consequently belong to the State. They will be entitled to go independently to this company when they set it up as a subsidiary if that is the way they want to operate.

They will have autonomy in that regard to go direct to the private sector and say "These are our plans for development in this area of telecommunications; it is a good investment vehicle and would you be interested in lending us money?" It is hoped that the private sector will agree, and the indications are that funds will be available for investment in telecommunications. Experience abroad indicates that it is an attractive scene for investment funds. What we are doing here is starting on that process. I take the point that once the Minister is giving a guarantee there is merely a semantic difference at this stage. Nevertheless, it is a difference and the beginning of a different form of seeking investment in the public area.

I have explained why it is necessary to come before the House and look for the Minister's guarantee. The fact that it has been given willy-nilly brings the matter into the realm of the public capital programme, though in terms of crude statistics some benefit may be achieved by having the matter done this way. I would like to reassure Senators that this is a temporary measure to take advantage of funds which are available and which are needed urgently to continue the high level of investment taking place on the telecommunications development scene. It would be a pity if these funds were not to be available when they are there or if anything is done that might suggest that this is an uncertain scene, that technical difficulties may crop up and it is not worth the bother, because many investments are available for these funds possibly on a much simpler basis. We would not want to queer the pitch for this new development, and we are anxious to be able to take up the funds that are now readily available for the reason of reassuring the investors that it is a good scene.

Of course, there is also the very practical reason that we need this money in order to complete this year's investment programme. The amount to be invested is £221.8 million, an immense sum. As Senators have universally recognised, investment in this area is important to the future development of the country. The competition for industries from abroad is becoming more intense. We must be in a competitive position and one thing that will enable us to sell Ireland as a location for these foreign industries is, of course, good telecommunications. It is a very important investment area which we must continue to attend to and that is the importance of being able to take up these funds that are available.

Senator Whitaker raised the question of capital and wondered whether I was converted. If he reads some of the minutes of the proceedings of the Joint Committee on State-Sponsored Bodies he will see that I made the point from time to time to people who were complaining about their equity position that it was as broad as it was long in so far as the Exchequer was concerned. I have no particular commercial ideology in this regard, but the one way we can test objectively the success of a State-sponsored company is to give them commercial criteria and look at their bottom line. Some of these companies have a social role and if that can be identified they should be paid separately for that. If we give them a commercial mandate and look at the bottom line we have to set them up according to proper commercial standards and normal commercial practice. That implies having a proper debt-equity ratio; otherwise they can take shelter for trading inefficiencies and point to the high increase that their loan capital has accumulated. However, this is opening a whole new area on which I would welcome a debate here at some time.

In relation to another point raised by Senator Whitaker as to the taking up of capital in this company by the private sector, that is not intended and it is not intended that the capital will ever be increased to enable this. It is purely a company to obtain loans, and that is the intention. The loans will, of course, be investments by the lenders in the telecommunications service. How the new Bord Telecom do this will be a matter for themselves, but I assure the House that they will have no power to sell off any part of their equity to any private investor. The House will see the provisions for the retention of the monopoly and so on when the main Bill comes before the House in due course. The board will be empowered to go to the private sector to borrow money and to have whatever leasing and other financial arrangements they want with their lenders, but the beneficial ownership will remain in the State as the main shareholder. I want to reassure the House about that. Senator Ferris expressed worries in that regard. I do not think anyone will want to take shares in this company having regard to the problem that would be incurred and the fact that it is guaranteed by the Minister. The Minister will hardly sell his guarantee along with the shares.

Senator Quinn asked what other sources of capital could be touched. He mentioned for example pension funds. It is very likely that pension funds and those managing them would be interested in telecommunications as a scene to invest some of their funds. The Minister for the Environment with his hopes for his new housing agency will be looking to those funds also. Therefore, ample opportunities for diversification will be offered to the managers of various investment funds.

Senator O'Connell and Senator Carroll were also worried about hiving off to the private sector. I assure them that that is not intended, that An Bord Telecom will be a State company with the shares owned by the State. There is no question of allowing the role of semi-State companies to be diminished for any ideological or policy reasons. If they turned out to be commercially inept, had not been given an opportunity to prove themselves commercially or it happened that they were not capable of fulfilling that role, then obviously, as a matter of practicality, one would have to look at it, but that would not happen for any change of policy with regard to the role of the semi-State bodies. They are well-established as part of the Irish economic and political structure and they will be retained unless some consideration such as I have referred to arises.

Senator O'Leary does not like the provision in the Bill that changes cannot be made in the memorandum and articles without the consent of the Minister. It is not a good argument to say that has been the case in every such Bill relating to this, but it would be an unusual person who would go to the company's office and see articles of association and memorandum littered with references to the Minister for Finance and not have warning bells ringing if he was proposing to do anything commercially with the company that might be affected by changes in the memorandum or articles. I cannot conceive how that could arise, having regard to the share capital and the provisions for the ownership of the share capital. It is right that the Minister should retain those powers as this is a State company and that any changes made in the mandate of the company through the memorandum would have to be subject to his sanction.

Regarding Senator Staunton's contribution, I do not want to open up the debate on the actual operation of the telecommunications scene but he did touch on this point. In fairness to the personnel concerned, I will have to take him up on it. He referred to the difficulties of getting an answer when you dial 10 in the city and compared it unfavourably with the position in the country and he was inclined to blame the personnel for this. It is not the fault of the personnel or is it lack of personnel. It is a factor due to the present unsatisfactory state of the telephone service generally, but a state of dissatisfaction which is improving rapidly and I am hopeful that in six or nine months there will be a clear public perception of improvement. The operator whom one is trying to get on 10 has also to use the same system to get the phone calls down the country that are being asked for. He or she is experiencing delay and that compounds the delay back to the person who has dialled 10. It is not the fault of the personnel and it is not the result of not having enough personnel. I must say that in fairness to them. They do a good job and retain remarkably patient composure having regard to the attitude of people who eventually get them after dialling for a long time.

Senator Leonard can be assured that the most efficient manner possible of dealing with telephone applications will be implemented and organised and there will be no change. A coherent programme of orderly development will be the policy. He paid tribute to my predecessor and I join him in that, but I will not confine it to my immediate predecessor. I will also include the Minister before that—Deputy Faulkner—and to be absolutely fair, and the record will bear this out, the first major improvement and investment in the telecommunications service was made when ex-Deputy Conor Cruise-O'Brien was Minister for Posts and Telegraphs. That is a matter of record which is very often overlooked. A glance at the Estimates for the Department for the years in question will show the graph going up, dipping and then coming up again. I recommend Senators to look at that sometimes and keep the whole thing in perspective.

I have covered the points raised, though not in the depth to which Senators might like them to be dealt with because the questions raised encompass serious implications and weighty issues. I assure Senators, in concluding, that there will be no hiving off of ownership to the private sector. It will not be privatisation but private sector participation. If I used that term instead of "privatisation" in my opening speech we might have avoided some of the worries that Senators expressed. When An Bord Telecom are set up and they go after money through the medium of this subsidiary company, Senator Whitaker will be convinced at that stage that it will be genuine private sector participation. I have to take the point that he makes now, nevertheless that does not diminish the fact that it is the thin end of the wedge towards starting this new development. To that extent this is an important and useful Bill.

I also want to thank my fellow townsman, Senator Fallon, for his good wishes and share with him the wish that this investment will continue and be of benefit to the well-known industry in our town.

Question put and agreed to.

Agreed to take remaining Stages today.