Seanad Éireann debate -
Tuesday, 19 Jan 1982

Vol. 97 No. 1

Fóir Teoranta (Amendment) Bill, 1981: Second Stage.

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

Minister of State at the Department of Finance (Mr. B. Desmond)

The purpose of this Bill is to extend the statutory limit on the amount of capital available to Fóir Teoranta from £35 million to £70 million. Fóir was established under the Fóir Teoranta Act, 1972, as a State rescue agency for potentially viable industrial concerns which are unable to raise capital from normal commercial sources. The provision of financial assistance is subject to certain general criteria. For example, a company seeking aid must be engaged in industrial activity or an ancillary activity. Employment and capital employed must be significant either locally or nationally. The promoters' capital contribution must be reasonable. More important is the stipulation that Fóir must satisfy themselves that a firm has good prospects of future profitability.

I think it is important to examine closely the environment in which Fóir are operating in order to arrive at a full appreciation of the rôle they play as an essential part of our overall industrial strategy. As stated by the Minister for Finance recently, one of the major problems facing the country today is unemployment arising partly from the growth in the labour force and more seriously in my opinion from redundancy, the displacement of those already at work. This is the prime area of Fóir's concern—the protection of existing jobs where this can be economically justified. Indeed Fóir are not alone in this regard, as the IDA, who concern themselves in the first instance with the creation of new jobs, also have a rescue unit who help those firms which are experiencing trading difficulties and try to find new projects to replace firms which have closed.

The severity of the recession forced many existing companies during 1981 to concentrate on staying in business rather than on expansion. For many firms the pressure of increasing competition for shrinking markets, the difficulty of introducing new products and rising input costs proved too much. The statistics on redundancy are important in quantifying the size of the problem confronting State agencies such as Fóir and the IDA rescue unit.

Job loss, as measured by the level of notified redundancies, deteriorated considerably in 1980 as compared with the previous year, while a further disimprovement is again evident from the figures for 1981 which are available so far. In 1980 the total number of notified redundancies was 14,664 or 94 per cent higher than in 1979. Of these, some 56 per cent were in the manufacturing sector even though only about 20 per cent of the total at work are engaged in this sector. In terms of numbers involved, the worst affected industries were food, textiles, metals and engineering and clothing.

While figures are available only in respect of the first three-quarters of 1981 it is already clear that the numbers of notified redundancies, both in manufacturing industry and in total, will significantly exceed the 1980 returns. In the first nine months of last year, total notified redundancies numbered 13,024, of which some 8,114 or 62 per cent related to the manufacturing sector. Metals and engineering, food, fertilisers, chemicals and clothing were the worst affected sectors during this period. The indications are that the outturn for the full year will show that 1981 was by far the worst year for notified redundancies since the peak figures recorded in 1975.

Disturbing though these figures are, they do not, unfortunately, reveal the true incidence of job loss occurring in the economy. While no official statistics are available on total job loss, it is estimated that notified redundancy figures, which refer only to notifications for possible statutory entitlements under redundancy payments legislation, may understate the true extent of overall job loss by a factor of between two and three. Taking manufacturing industry as an example, the IDA estimate that gross job loss in the sector amounted to 27,000 during 1980 whereas the number of notified manufacturing redundancies recorded was 8,279. Not unexpectedly in the face of the disappearance of jobs on this scale, the numbers engaged in manufacturing are estimated to have fallen by over 9,000 during the year. During 1981 it is tentatively estimated that, despite some fall-off in the rate of job loss being experienced, it will not be sufficient to prevent a further decline in the level of manufacturing employment.

In the light of job losses of such proportions it is imperative that we as a community do not jeopardise the efforts being made by the IDA, Fóir Teoranta and other agencies to protect and create employment. In addition to a very serious and growing unemployment problem the economy is also experiencing grave difficulties in the areas of inflation, the balance of payments and the public finances. Unless all sectors in our society co-operate fully in overcoming these difficulties, the actions of Government and other State agencies in this regard will be seriously undermined.

In addition to the problems which I have just mentioned we face the challenge of an increasing number of young people coming on to the labour market. The task of providing jobs for those people, together with that of reducing the current level of unemployment, require that we increase our efforts to maximise our productivity and output and also to attract the highest possible level of both domestic and foreign investment. In order to succeed in doing so, it is vital that all concerned, both unions and employers, adopt a sensible approach to income developments and to industrial relations. Over the past three years our competitive position has deteriorated as compared with our other trading partners in the narrow-band of the EMS. This situation has contributed to the growing number of redundancies experienced over the past two years and has to some extent diminished the attractiveness of the economy as a base for new investment.

While the effects of income increases out of line with those of our competitors are obvious, the way in which a poor industrial relations climate can have an equally damaging impact on economic recovery may be less clearcut. Less obvious or not, the expansion of investment and output and the safeguarding of jobs are equally dependent on our industrial relations behaviour. Industrial strife not only disrupts existing production and services but also seriously damages our prospects of attracting new industry from abroad, thus reducing our potential for future employment creation. Its effects are always damaging and particularly in a time of international recession, when there is intense international competition for orders and for mobile investment. The prospects for the international economy in 1982 are for some recovery. However, this will not automatically mean that our recovery is also assured. Unless we adapt to the harsh realities of the international environment and work in a spirit of industrial peace we cannot hope to take advantage of the expected improvement in world markets.

Securing industrial peace requires committed efforts by both workers and management. In the interest of the entire community, every attempt must be made to avoid industrial action and to make full use of the normal procedures available to both sides of industry in doing so. Moreover, there must be greater appreciation on all sides of opposing points of view on the issues underlying disputes and to resolve them as quickly as possible. This applies both to the public and the private sectors. In the public sector, where disputes gain greater prominence, disruptions to essential services can have a very damaging effect on production and employment in the economy generally. In the private sector, we cannot afford the loss through industrial unrest of output and employment in any enterprise or concern, no matter how small, in the current economic climate. The success of our efforts to resolve the economic crisis requires the fullest possible co-operation. Therefore one must view with great concern the prospect of any escalation of the current dispute between certain craft unions and the FUE more particularly when a quite adequate structure is available to process wage increases in this sector.

I would like now to quantify the efforts being made by both the IDA and Fóir to ensure employment in the years ahead for our work force. Despite adverse circumstances and an uncertain economic environment during 1981, the Industrial Development Authority achieved a record level of commitments to industrial projects in the year: 2,500 new projects involving an investment of well over £900 million were approved by the Authority for grant assistance amounting to more than £300 million. The companies concerned expect these projects to provide employment for 36,500 persons when full production is reached. These figures indicate the confidence of industrialists both Irish and overseas, in the longer term prospects of Ireland as a suitable base for manufacturing industry.

In recessionary times the competition from other countries seeking overseas investment will present formidable obstacles to the successful negotiation of new overseas projects in Ireland. The IDA, therefore, will be striving to obtain an increased share of declining world investment.

During 1982, the IDA will continue to seek new opportunities in sectors with good growth prospects. These will include areas like precision engineered components for the automotive, aerospace and robotics industry, electronics products, international services such as computer software, R & D international financial services etc., natural resources, beef and dairy products, forestry, all of which could form the basis for considerable development.

On the job retention front 44 rescue or refinancing packages were completed by the IDA during 1981 involving the maintenance of more than 7,400 jobs and the creation of 200 new ones. In addition, the IDA successfully assisted in 33 takeovers, when rescue packages proved impossible. More than 700 jobs were saved in these takeovers which have a potential to create an additional 1,770 jobs.

Also in 1981 Fóir Teoranta approved loan assistance totalling about £5.5 million to 39 firms employing some 5,400 workers. Since their establishment in 1972 Fóir have approved funds in excess of £52 million in respect of about 470 concerns with an employment content of over 60,000 which represents a very considerable total. By the very nature of their operations a certain proportion of firms assisted will not survive. Experience has shown that of all firms assisted about one-third are trading profitably, one-third are marginal cases, and the remainder have closed down. However, this does not mean that these jobs are totally lost. Many firms re-open under new ownership with new equity injections

I would like to draw the Seanad's attention to the detailed investigation of the company's operations and performance undertaken in 1980 by the Joint Committee on State-Sponsored Bodies, which has had many distinguished Members from Seanad Éireann, including the Leader of the Opposition, Senator Eoin Ryan, who made a tremendous contribution to the work of this committee as chairman. The committee's detailed examination of Fóir activities covered the restriction of Fóir's responsibility to manufacturing and mining, the basis on which they become involved with firms in difficulty, and their relationship with other State agencies. In their conclusion they saw no need to alter existing practices in this regard. On examination of the cost per job saved, the committee were of the opinion that the effective cost of Fóir's activities had not been unreasonable. They found that the cost per job saved is significantly lower than the cost of a new job created by the IDA in larger firms but closely related to the cost of a new job in smaller firms which are representative of the majority of Fóir clients. The committee felt that Fóir had made "a reasonable impact in stemming the level of factory closures".

Finally, the committee looked at Fóir's relationship with the commercial banks. They felt that as most Fóir clients would also be clients of the banks, the provision of finance by the banks on foot of guarantees from Fóir should be investigated. The present position is, of course, that, in many rescue cases, Fóir Teoranta act in conjunction with the private banking sector and in many cases Fóir will negotiate arrangements whereby existing bank loans are continued or extended as part of the rescue operations. Responsibility for rescue is thus a joint one and I think the present system works reasonably well and, while the committee's recommendation in this regard is being discussed with Fóir Teoranta, I do not envisage any real departure from it.

I think that it is highly significant that the joint committee's principal conclusion was that Fóir were fulfilling a useful role and that there was a continuing need for a lender of "last resort". They also agreed with the assessment of the Department of Finance that "Fóir performs a most valuable function on the basis of rational criteria by helping industrial firms in temporary difficulties to survive and recover profitability. Its services are of particular value in times of exceptional economic difficulties".

Fóir Teoranta are reaching the limit of their borrowing power which was fixed at £35 million by the amending Act of 1976. Amending legislation to increase their resources is therefore necessary to enable the company to continue their work. Section 2 of the Bill before the Seanad today proposes that the new limit on borrowing by Fóir Teoranta be fixed at £70 million which is an increase of £35 million on the present limit. On the basis of disbursements since the last Act, the extension proposed should suffice for another four or five years depending on demands for reconstruction finance. The company have been almost entirely financed by borrowing from the Exchequer, as the returns on the company's share and loan investment have been comparatively small so far. The company's income from their investments and the repayment of loans is growing but they will continue to be short of the amount which they are likely to have to advance in respect of new applications for assistance. It is proposed, therefore, in section 3 of the Bill, to raise from £35 million to £70 million the limit on the power of the Minister for Finance to provide loan capital to the company.

When the original Act was introduced the Seanad was informed that an administrative limit would be introduced on Fóir Teoranta's discretion to advance funds. This was fixed at the time at £250,000 and it is now intended to raise it to £1 million. Any advances in excess of this will be subject to the consent of the Ministers for Finance and Industry and Energy.

Fóir Teoranta, are, of course, but one link in the chain of the State's efforts to give assistance to industry. Most of this effort is, through the IDA, principally geared to encourage industries to establish and expand in Ireland. CTT, our export board, provide valuable assistance to firms who want to expand into new markets. The present tax system for manufacturing industry is extremely generous by any standards and provides every possible incentive for expansion. However, we will always have problems with our existing industrial base due to changed market conditions, costs and so on. So, while we would ideally like to see Fóir used as little as possible as that would mean a healthy industrial base, there will unfortunately always be a need for reconstruction finance in certain cases. Fóir Teoranta provide an orderly and efficient procedure for dealing with these firms.

Therefore, I confidently recommend the Bill for the approval of the Seanad as it will enable this vital State agency to continue their important work.

Mr. Fallon

I add my support to this Bill. I regard it as a very important Bill which should be welcomed by all. As the Minister said, the purpose of the Bill is to extend the statutory limit on the amount of capital available to Fóir Teoranta from £35 million to £70 million. Before Christmas Members of both Houses discussed the Youth Employment Agency Bill and many Senators and TDs expressed an element of objection to it because they said there was not sufficient mention of job creation. Nowadays job creation is very important. Last week the number of people unemployed reached 140,000 and the Tánaiste recently said that that figure would probably rise. Therefore job creation, and in this case job preservation, are obviously very important matters. For this year and the years ahead the exercise of job preservation will and can be vital. Fóir Teoranta, the body given responsibility for coming to the assistance of ailing industry, are obviously the people to do this, and they have been doing it successfully down the years. The Minister said the company seeking aid must be engaged in industrial activity or an ancillary activity.

The fact that we are asking for the limit to be increased from £35 million to £70 million seems to indicate that this is an opportune time to refer to the activities of Fóir Teoranta and to extend their operations to embrace many other activities, including agriculture and a whole series of industries right across the board. I am aware that the Joint Committee on State-Sponsored Bodies discussed this matter and were not in agreement. There must be an onus on us to extend it in the knowledge that we are in a very serious recessionary and difficult period. The number of applications received by Fóir Teoranta for 1980 showed an increase of 50 per cent and that is clearly a reflection of the serious international economic recession which has forced many companies out of business.

Everybody agrees that this trend will continue and that large and small industries will go to the wall this year and in the years ahead. I cannot help thinking that perhaps a greater involvement by Fóir Teoranta in smaller industries would be a help. I know the difficulties which face a small company, for example a company employing 25 to 30 people, and for obvious reasons they do not receive the same headline as an international company or any large firm. For example, the Clondalkin Paper Mills got quite a lot of publicity, and I hope that that business will be saved, but the smaller companies have not got the clout which the bigger companies have.

People in the rural areas do not know enough about Fóir Teoranta and are not aware of the existence of this body until it is too late. A firm employing 25 to 30 people touches on the lives of maybe 200 or 300 people. If that firm gets into difficulties or closes, it can have a very wide-ranging effect on that rural area. I would like to think Fóir Teoranta would move in, if possible, more swiftly, to save the day. If this happens there would be a greater amount of success.

The IDA are doing extremely well in the area of job creation. It is basic economics to say that savings can be made through a job preservation situation. For example, a person with a job is contributing to the pay-as-you-earn scheme and to PRSI. If he has a car he is buying petrol. He also buys food. This means that a great deal of his salary is going back to the State through taxes. On the other hand, the unfortunate who loses his job goes on social welfare, or gets his redundancy payment. This means he is getting from the State all the time. Every effort to preserve or rescue jobs, as Fóir Teoranta are doing, is welcome.

The Minister said Fóir Teoranta approved funds in excess of £52 million in respect of 470 concerns with an employment content of 60,000, which represented a very considerable total. That is extremely good work but the years ahead are going to be more difficult and therefore more finance will be necessary.

I was a little surprised at what the Minister had to say about saving jobs. He said the committee were of the opinion that the effective cost of Fóir's activities had not been unreasonable. They found that the cost per job saved was significantly lower than the cost of a new job created by the IDA in larger firms but closely related to the cost of a new job in smaller firms which are representative of the majority of Fóir's clients. That surprised me, I thought the opposite would have been the case. However, I accept what has been said. Generally I would be failing in my duty if I did not support it. The Minister rightly said that Fóir Teoranta must be satisfied that the firm to be saved has good prospects of future profitability. We should not be propping up lame ducks. State funds should not go to failures. I welcome the Bill and hope that the Minister can do something to extend the scope of the activities of Fóir Teoranta. I wish success to Fóir Teoranta and continuation of their important role.

Mr. S. O'Leary

I welcome the Bill and express my support for the measures proposed therein to raise the borrowing power of the company from £35 million to £70 million and to amend the 1972 and 1976 Acts accordingly. It was my unfortunate duty, not only as a public representative and a citizen but as a former practising accountant, to go with a number of my clients to discuss with the executives of Fóir Teoranta the possibility of saving whatever particular industry was under consideration at that time. It would be remiss of me if I did not place on record that the management of Fóir Teoranta, in so far as they deal with the business of carrying out the duties imposed on them by the various Acts passed by both Houses of the Oireachtas, give an excellent service to industry. They are to be commended in that regard.

The general welcome on all sides of the House for this Bill is important because it emphasises the all-party approach towards improving our industrial base. This unanimous approach is something which should be built upon and emphasised because in requesting industrial firms to come here it is important they realise that all the political parties likely to achieve power in the foreseeable future have as a common objective rational industrialisation to give an improved standard of living and to give employment to our growing population. We should not underestimate the importance of the unanimous and general approval that measures of this sort get in Ireland.

It is easy to discuss the Fóir Teoranta Bill because it is not the brainchild of any one political party but has unanimous support. There are various provisions, which I hope will be included in future Bills, to enable the scope of the activities of Fóir Teoranta to be widened considerably to take into account the changing circumstances. This means that the aid we give to our industries will be changed to meet the challenges of the 1980s and of our growing population.

The Minister, in introducing the Bill, referred to the Seventeenth Report of the Joint Committee on State-Sponsored Bodies on Fóir Teoranta which was under the chairmanship of the distinguished Leader of the Opposition in this House. The report is a model of investigation of the activities of this non-controversial organisation and lays before the Oireachtas information which is invaluable in considering the appropriateness or otherwise of the amendment of previous Fóir Teoranta Acts.

The criteria within which Fóir Teoranta work are laid out in paragraph 6 of The Seventeenth Report. It reads as follows:

The primary objective of Fóir is to provide, or enable the provision of, finance for industrial firms in financial distress. Financial support can be made available through investment in the ailing firm by way of share capital, debentures, secured or unsecured loans, bill finance or guarantees in respect of borrowings by such firms. To obtain financial support, distressed firms have to be, in the opinion of the Company, "eligible concerns" under the criteria laid down by the Fóir Teoranta Act.

These are worth repeating.

"A concern shall be an eligible concern...if in the opinion of the Company

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

Senator Fallon has already referred to the limiting restrictive nature of that criterion and in the expansion of our concept of what is industry and what role service industries can play, some reconsideration of this criterion would be worthwhile and possible.

(ii) the employment involved and total capital employed are significant either nationally or locally,

The word "locally" should be stressed. What appears not to be important nationally could be very important locally.

(iii) The proportion of its owners' contribution to the total capital is reasonable,

Obviously, if the owner has not been in a position in the past to make a contribution, it is unreasonable to expect that public money would be used in that situation.

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

It is reasonable to expect profitability, not for the sake of the future wellbeing of the owners of the company, but recognising that in profitability rests the best chance of success and the continued operation of the firm.

(v) its continuance is in doubt because of inability to obtain its financial requirements from commercial sources,

The banks should examine the matter first to ensure that Fóir Teoranta is used only as a lender of last resort

and (vi) its failure to receive financial assistance would have serious repercussions either nationally or locally.

No rational person could disagree with the criteria which are set down but one should examine whether they are the only criteria that should be applied. I propose to deal with that point some time later.

What is important with regard to the criteria is not their existence as such but how they are interpreted by the executives of the organisation. There is no doubt that the executives of the organisation, while not being interfered with by the Minister in any individual application, will interpret them in a manner which is consistent with the philosophical approach of the Minister for Finance or of successive Ministers for Finance. If successive Ministers for Finance have a particular approach towards the granting of aid, that will in time work its way down through the criteria and will be applied by the executives. Successive Ministers for Finance have indicated, and indeed the joint committee have indicated also, that the interpretation of these criteria has been too narrow and has had the serious consequences of a declining manufacturing base referred to by the Minister in his introductory remarks.

The Minister has referred to the scale of the problems which exist in the manufacturing area and the scale of the redundancies which face the country. We should not misinterpret the importance or we should not lay down the importance of the manufacturing area in the general wealth and wellbeing, not only of that portion of the economy which is directly dependent on manufacturing but in the general health of the economy, in the number of services we can provide and the way in which the Government can generate money to ensure that the services provided to the community are suitable for the twentieth century State. The scale of redundancies which the Minister referred to is, under any criterion, frightening. This situation has existed during the tenure of successive Governments and the whole question of the competitiveness of our industry is obviously a very significant reason for the failure of a number of these concerns and also for the excessive cost of money in these inflationary times. While it might be cheap in the long term it will not have the backing one would have if investing in land or in an office block, which would inflate at a price which would be greater than the cost of the interest. If one is investing in something like a manufacturing concern where a substantial portion of the investment is in plant which will depreciate rather than appreciate from the date on which it is required, the high inflation and high rates of interest are a considerable drawback and disincentive to the proper organisation of a manufacturing industry and its retention.

Redundancies in the first nine months of 1981 totalled 13,024 and the 1980 figure was higher. The scale of redundancies is obviously going to be of the order of 16,000 or 17,000 for 1981. The significant fact is that 62 per cent of them are in the manufacturing sector. The manufacturing sector with which Fóir Teoranta deal only affects 20 per cent of those at work. Yet they deal with a highly significant portion of those who are being made redundant in the manufacturing sector. Therein lies both the problem for the manufacturing sector and the problem for our economy because no economy can continue without a healthy manufacturing base. In our case we are talking about mining and agriculture-based industries. Therefore, the importance of the manufacturing sector is rightly stressed.

There appears not to have been either on the part of the Joint Committee or of anyone else sufficient analysis as to the reason for these 13,024 redundancies. We all have an idea of the importance of inflation and of the international decline and recession but no attempt is being made to quantify them. It is very difficult to see to what extent Fóir Teoranta who, given a free hand, have changed that situation. This is really where our problem lies.

It is well that the House should know what happens when a firm approach Fóir Teoranta. The way in which the money we are authorising by way of this Bill will be used will be that a firm who find themselves in distress will approach Fóir Teoranta who will lend money at a high rate of interest. All that interest might not be collected because the firm might fail in the long run. I am not in the slightest concerned with the small number of millions of pounds which have been lost by Fóir Teoranta by reason of failure. Given the service which they have provided for the industrial base of the country the small amount lost—about £11 million in a period of nearly ten years—is a very small price to pay for the excellent work they have done. It indeed shows a very conservative approach to their work because they are in the high-risk business. These loans are given at a high rate of interest and very often what happens is that all you are doing is postponing the inevitable and with interest rates as high as they are you are not really solving the problem of the company to lend it more money because a company in financial difficulty very often has not the capacity to repay substantial loans. What they need is not an interest-bearing loan but a non-interest bearing loan by way of equity. It is within the capacity of Fóir Teoranta to make investments in a company by way of equity. The way in which they have been doing that is that 10 per cent of the advances they have been making have been by way of share capital, and 90 per cent by way of loans. The balance between interest-bearing loans and equity investment has gone much too far in favour of a preservation of the security of the money which Fóir Teoranta are investing and not gone far enough towards the very important factor of giving non-interest bearing money by way of equitable investment in the equity of the company.

It appears that very often what has happened is that where a company has got an investment from Fóir Teoranta it has survived for a period of time and has then succumbed. It is not the fact that it has eventually succumbed that worries me but the fact that Fóir Teoranta, by going in and taking some of the security which was available after the bank is given the original security, has given preference to itself and reduced the rights of the unsecured creditors of that company still further. In fact, the company have speculated not with the taxpayers' money, not with Fóir Teoranta's money as voted by the Dáil and approved by this Act but with the money of the unsecured creditors. The people who eventually pick up the tab are the unsecured creditors who get a lesser percentage in the £ than they would have got if the company had gone out of existence in the first place. As a result and because of that, it is necessary that Fóir Teoranta's mind should be directed very forcibly—this was referred to in the examination of the executives by Deputy Liam Lawlor— towards the advisability of investing in equity in the company, because very often a company could be viable if it had a non-interest bearing loan but would not be viable if the money which it received was interest-bearing, particularly in a situation where the interest is likely to be of the order of 20 to 21 per cent.

What is required with the £35 million which this Bill proposes to make available to Fóir Teoranta is a change of emphasis towards the giving of shares in equity in suitable firms—I am not saying in every firm. Obviously, there is a problem, as pointed out by the executives of Fóir Teoranta, in that some of the companies are so small and the ownership of the company is so tightly held that the investment of equity there would leave Fóir Teoranta in a very difficult situation. That can be overcome by the creation of a special class of equity, by giving instead of ordinary shares what one might call A ordinary shares and special rights which will guarantee the security of their money over and above the existing types of equity. Those who originally invested would still be given the prospect of a reasonable return for their money.

Fóir Teoranta has to develop very much away from the idea of being just a banker and a lender of last resort to being both a lender of last resort and an industrial holding company, as it is authorised by the way in which it was established, with a substantial portfolio of investments. Some of those would be successful and some would not be. In a situation like that there is risk and that risk must be recognised.

What I propose is not extraordinary or in conflict with the Government's published programme which includes a national development corporation which I would see very much in the rôle of doing the same thing for new ideas and new ventures. With regard to the existing manufacturing scene, Fóir Teoranta could become very much more an industrial holding company, holding, in some cases, the majority of the equity of the company and, in other cases, the minority. Its existing portfolio should be reexamined to see whether in the case of some of the third of the companies which at present it has on its books, and which it considers to be marginal, the conversion of the loans to equity would improve the chances of the survival of that company and, by doing that, improve the stability of the manufacturing employment which is given, thereby improving the general economic climate here. That should be undertaken as a matter of extreme urgency. I do not think that in doing so we would be out of line with any of the countries which do not pride themselves on their left wing leanings; even the most right wing, or the most conservative of countries like the United States of America, use Government funds to support manufacturing industries as these form the basis of their service sector. They use public funds for this purpose. They do it in sophisticated ways like awarding defence contracts to companies and by doing that they enable that company to exist in a hostile climate. In France and Italy there are State conglomerates in existence partly as bankers and partly as industrial holding companies and they recognise, as we must, that a country cannot exist without a strong industrial base, that the rest of the employment which we create depends on the strength or otherwise of our industrial base.

We should fight tooth and nail to make sure that we do not lose any industrial jobs except where that is inevitable and where there is such a fundamental change in the pattern of trade as to make that inevitable. No single manufacturing job should be lost here because of the lack of imagination of the Government or because of the lack of a proper instruction to Fóir Teoranta as to the method in which they interpret the criteria laid down for them in the Acts dealing with Fóir Teoranta. We need a new approach, something which is not included in this Bill. However, I hope it will be considered as a result of this debate and as a result of other stirrings that are taking place throughout the economy. I hope that new approach will be considered by the Government, and the Opposition, so that it will become our common objective. I can give the House an example of a range of companies which were dealt with quite expeditiously and judiciously by Fóir Teoranta but which together make a pretty dismal tale. The whole timber processing industry here has virtually collapsed. Each individual company was examined and the criteria set out were applied to them with the result that in some cases a decision was arrived at that the company should close or that further help would not be given although it would have been to the overall benefit of the company if the Fóir Teoranta board had been in a position to take an over-view of the whole position with regard to that timber industry.

In the recent past four companies were in existence—some are still in existence — involved in the processing of native timber. The processing of this native timber was profitable for the Department concerned and also of advantage to the Department in that the thinnings in the forests were being used in constructive fashion and our forests were being improved by the extraction of the timber. The companies I am referring to are Munster Chipboard in Waterford, the Scariff company, Irish Board Mills in Athy and Clondalkin. To a greater or lesser extent they all used the thinnings from the forests or various items of native timber. Those four companies have been or are still the subject of help by Fóir Teoranta. In the consideration of each of these, Fóir Teoranta no doubt made the correct decision but nobody ever thought what would be the position of the Irish forests if each of those firms went out of business.

The economic option in the case of each of those companies was followed but the overall problem was that it was unreasonable to expect manufacturers to prosper when they did not have control of the native timber. As the manufacturers did not have control of the native timber they did not prosper and as a result each of them got into difficulties to a greater or lesser extent. Sweden would be a very beneficial example in that regard in that the Swedish economy is very much owned and controlled by the State. Yet in that country the timber resources are predominantly in private hands, not in State hands. It is recognised that the manufacturing end can prosper only under the benign control of the State. Here the native timber industry has fallen almost exclusively under the control of the State and the manufacturing concerns were in the hands of private individuals. When the pressure came on, the private individuals were not able to sustain the vast investments which were required and, as a result, each of the four companies I have mentioned, and the industry in general got into difficulties.

If the Government wish to retain their exclusive or predominant position in the growing of native timber they must move into the area of controlling and operating manufacturing companies which use this native timber. If they do not, private companies who do not have this resource available to them will not move in without owning the raw materials or at least having some share in the equity of those raw materials. The consideration of that by Fóir Teoranta was in a very isolated way: whether the mill in Athy was worthwhile, or whether it could survive. They did not have it in their brief to tell the Forestry Division that a real problem existed, that the Forestry Division had the potential to make a profit, and that profit should have been used to maintain the manufacturing industry.

A very much larger and broader approach to the problems of industrial development is needed from Fóir Teoranta before we achieve the kind of objective we all desire to achieve, that is, to have the manufacturing industry placed on a firm and sound basis. We all recognise that no manufacturing industry here can be on a firm basis until such time as the underlying malaise of the economy is tackled and anything I say has to be read in that context.

The kind of matter which I should like to have included in the Fóir Teoranta (Amendment) Bill does not conflict with — in fact, it supports and goes hand in hand with — the concept of a national development corporation which I would see as taking the new industries and developing them for the benefit of the country. Fóir Teoranta should be developed in a very constructive way to be very much more the dynamo of the Irish economy, to create and make the pace in the economy rather than just reacting to the bad news as it arises. Their development area and industrial conglomerate area should be put to one side, or should be the responsibility of half their management, and their rescue area should be the responsibility of the other portion of their management. By bringing the two of them together on occasion we should get a situation in which a company which goes to Fóir Teoranta would have a prospect of getting loans at market rates of interest and also a prospect of getting substantial investment by way of equity which would not be interest bearing.

The major problem which faces us with regard to Fóir Teoranta is the direction in which they should go. The matter was considered by the Joint Committee on State-Sponsored Bodies. Mr. McGuinness, chief executive and manager of Fóir Teoranta dealt with this matter. I quote from page 4 of the report of the minutes of evidence taken before the Joint Committee on State-Sponsored Bodies. In response to a question from Deputy Liam Lawlor he said:

On the question of share capital, it is true that most of our assistance takes the form of secured loans. There are a couple of reasons why we are not too keen to become involved in an equity situation. Most of the companies Fóir Teoranta helps are small to medium sized and generally tend to be owner-controlled and owner-managed. If we were to take equity for any significant part of our assistance, we would probably swamp the existing equity and become virtual owners of the company. As a matter of policy this is not a situation in which the Board would wish to find themselves. They do not wish to control, or even negatively control, a company which is in competition in the private sector. There is the negative side of it too. If, having got involved in an equity situation, we find that a mistake was made in giving help in the first instance, and that probably the right thing to do was to wind up the company, it could become very difficult to do so if the State, through a State organisation, had an equity interest in it. It could become very difficult to close down a company even if it is patently clear that that is the right course of action to take. Further, providing money by way of secured loan in many instances affords a measure of protection for the State's money because, if, unfortunately, things do go wrong, there is a prospect of recovering some of that money.

That reply, which is consistent with the policy followed by Fóir Teoranta, and which obviously is followed on the advice of and with the support of successive Minister for Finance, encapsulates the whole problem of Fóir Teoranta. They are very much involved in making sure in so far as it is humanly possible, that the money they lend is secured and less involved in the question of whether or not the interest on the money they advance is a burden on the company in question.

Many of our industrial concerns, particularly our smaller and medium-sized industrial concerns, were started off by people with a very small share capital. They put very little money into them. They put years of work into them. This is of immense value. It is not shown by way of share capital in the profit and loss account, but it is of immense value. Many companies are under-capitalised. I am not talking about companies affected by the recession, but ones which are structurally defective and cannot overcome the recession because they have not got the resources to fall back on, which is another way of saying they are under-capitalised. The man who started them is not in a position to put in sufficient funds to enable them to cope with the bad times. Where they are under-capitalised, lending them money is no solution to the problem because lending them money only adds to the burden of the interest repayments they have to make.

There are many companies — of course this does not apply to every company — whose only prospect of survival is to get money without having to pay interest on it. That can be done only if part of the equity or ownership of the company is transferred to the group or individuals who supply that money. Fóir Teoranta have a substantial rôle to play in that regard. If it is necessary to introduce legislation to insulate them further from the kind of pressure which Mr. McGuinness seems to think they may be subject to — and I am sure he is right — that should be done. It is most important that we should support and preserve companies who need money, who cannot borrow it from the banks, but who have the capacity to repay interest should they get money from Fóir Teoranta. We should also support companies who have not got the capacity to repay interest, who have no realistic prospect of repaying the money but who, if they got the money in the first place would be a viable proposition on their new equity basis, on their new improved and expanded equity. It is our responsibility to ensure that they get State participation, and that we face up to the many problems created by the State having an indirect share-holding in many of these manufacturing companies.

Throughout the twenties and thirties successive progressive Governments were not afraid to invest in industrial projects which have borne fruit. Some might be bearing less fruit now 50 years later, but we have had 50 years of good results from them. We should again take our courage in both hands and not be inhibited by any Department of Labour or other ideological hang-ups. If it is necessary for the Government indirectly to invest in these manufacturing companies for the good of our community, then they should do that. They should do it in the way appropriate to our country, in precisely the same way as the Government of the United States of America do what is appropriate to their country and as do the remaining members of the European Economic Community, countries considerably more advanced than ourselves. We might well emulate the way they have done it in the past for the benefit of their industries.

I support the Bill. I welcome the increase from £35 million to £70 million, given the prospect of this new approach. I am anxious also that the requisite legislation to establish the National Development Corporation be forthcoming. That should include an expanded rôle for Fóir Teoranta in respect of our existing companies, because no manufacturing industry here should be lost unless preservation is totally uneconomic. If it is, then we must face the inevitable. When this Bill is passed I hope the Government will consider further the representations I have made and those of others, including Deputy Lawlor to whom I would like to pay tribute on his excellent probing of this matter before the Joint Committee. I hope the Government will consider these points and ascertain whether a further change of policy would be in the public interest.

Professor Hillery

I join in welcoming this Bill. It is not often, either in the House or outside, that we can confidently commend the work of a State agency. Therefore I am happy to congratulate Fóir Teoranta on their excellent work to date and wish them well in the future. As a body they are of course primarily concerned with the preservation of jobs. We all agree that jobs and their creation now present the primary economic and social objective of our time. An increase in the capital available to Fóir was under consideration by the Department of Finance at the time the hearings took place with the Joint Committee on State-Sponsored Bodies. This has now come to fruition in the form of an increase in the capital available from £35 million to £70 million. This is a welcome step. Unhappily it is a matter for regret that, in the light of our present unemployment levels, this money will be needed as never before.

I wish to touch on a few points only, the first or which is the early warning system referred to in the Joint Committee Report. Discussing the problem of the early warning system and the reason for it, Fóir stated and I quote:

...the fact is that we continue to receive requests for assistance at very short notice. The reason for this would seem to be psychological; many businesses experiencing financial difficulty will go to endless trouble to conceal their plight from creditors, bankers and financial advisers in the expectation that things will come right. The result very often is that irreparable damage has taken place before we become aware of the company's problems.

I would urge Fóir Teoranta to continue their efforts to improve the early warning system. It is not really good enough that companies in such difficulties should behave in this fashion when there is so much at stake including jobs. These companies should bury their pride, or perhaps their incompetence, and seek assistance at the earliest possible moment.

On the question of competence it is evident from the reports of the company itself — again referred to in the Joint Committee Report — that, among the companies seeking rescue assistance, the poor calibre of management and bad industrial relations stand out. This makes the case for more investment, more funds for management training through such bodies as the Irish Management Institute, the University Business Schools — I being attached to the UCD Business School — for more resources and effort in the field of management education and, in the context of industrial relations, in the field of trade union education. In recent years there has been a very welcome increase in funds for trade union education. It is my hope that increased funds—despite the financial stringencies at this time—will be made available in the coming budget. The Minister referred at some length to industrial relations. The critical level of industrial relations practice, it seems to me, is at the work place. Therefore management training, including first-line management and shop steward training, are of vital importance to improving the level of knowledge, expertise and professionalism at that level.

The Minister has rightly stressed the importance of orderly developments in pay and in industrial relations generally. I fully subscribe to what he has said, including the obvious need for both sides to adhere to procedures for dispute resolution.

The Minister also referred to the underlying causes of industrial disputes. One of the problems that both sides of industry have to cope with in this country is the absence of a basis of factual information on which to improve industrial relations; in other words, there is a continuing need for more research on which to base proposals for change and policy decisions. In that context, at present time — in my department in UCD — we are carrying out a study into the causes of industrial disputes in the period 1960-1980, including unofficial disputes. We hope that, following our efforts, some valuable research material will be available for use by practitioners. I might add that we are working on very slim resources. This raises again the question of priorities and resources for industrial relations education and research.

There is, of course, an important link between the quality of industrial relations and industrial investment and, therefore, an important link with jobs. As a country we have a lot going for us even in these difficult days. We have political stability, we have a young educated labour force. As members of the EEC we have access to the teeming markets of the Community and it is generally agreed that the IDA do a highly professional job in attracting industry to this country. However having referred to the EEC, that brings us back to the question of pay levels and of our competitiveness if we are going to make any real impact on our problems. The harsh reality in regard to attracting industrial investment is that Ireland is competing against many other countries in attracting investment here.

This leads me to the conclusion that we just cannot afford the luxury of bad industrial relations which, after all, is a field within our domestic control. My final point is in the form of a question: Fóir Teoranta come under the Department of Finance and the IDA come under the Department of Industry. Is there a case for the same Minister being responsible politically for both institutions? After all the work of the IDA and of Fóir Teoranta is closely interlinked. It might make for more efficient decision-making in dealing with companies in financial difficulty were both agencies responsible to the same Cabinet Minister.

Mr. Conway

Like all other Senators I, too, welcome this Bill to increase the capital available to Fóir Teoranta from £35 million to £70 million. I acknowledge also the criteria laid down by Fóir Teoranta to examine applications on the basis of the employment content, of the amount of capital employed in these companies, the capital subscribed by the owners of these companies and also the prospects of the companies relating to profitability, marketing and so on. I accept that these are adequate and sufficient yardsticks to examine the efficiency and profitability potential of the companies. I agree with other Senators when they said that failure to receive assistance in time has often led to many closures and many losses of jobs.

I accept the Minister's point that in 1981 approval of loan assistance totalled £5.5 million to 39 firms who are employing 5,400 workers and I pose the question, how many of these workers would be redundant now if Fóir Teoranta were not there?

The arrival in a company of a receiver is often the death blow to the ailing company. When the liquidator is appointed his salary and expenses are the first charge on the company and in many liquidations we have seen in the past the liquidator and his staff are the only winners. We should call for an investigation of the fees charged by the liquidators and the order of preference they hold in winding-up situations. I submit further that the redundancy and holiday payments of employees of the company should be the first charge on a company and not that of the banks and the fees of the liquidator.

The management unit of Fóir Teoranta assists and advises on marketing, production, finance and other matters and it has its own team of experts. I believe that this should be expanded and it should be used more than it has been in the past. It should be used to help companies who are in difficulty or who are moving into difficulty. We have good young companies who are strong in finance and very weak in organisation, who could be very strong in production and weak in finance, who could be strong in finance and very weak in industrial relations. The management unit should be expanded to help companies who need advice.

The situation at present in commercial life is that when banks come to process cheques of companies they will process the cheques to suppliers and others and the cheques for PAYE and PRSI will be referred to drawer. The Government always come last as far as the commercial banks are concerned. When we look at liquidations, the liquidators' reports and the list of creditors we find in nine times out of ten that the biggest creditor is, in fact, for PAYE and VAT. There should be a higher profile as far as PAYE and VAT are concerned. We should examine the situation as to why the Government tend to be the largest creditor.

During the years the assistance of the IDA to encourage industry has contributed much to the growth of industry in the country, but particularly in Kildare. There is a great debt owed to the IDA for their encouragement through the 45 per cent grant. I believe that now is the time to review this grant structure. It is not good enough in the Dublin area to have 25 and 35 per cent and in places like Kildare and other expanding areas the grant should be increased from 45 to 50 per cent. Much more restrictions should be placed on financing people who themselves have not been successful in business. They are inclined to move into business but make a mess of it and the employees suffer. The employer himself then gets off to a fresh start with the blessing of the IDA and a new grant.

There should be greater liaison between An Fóir Teoranta, the IDA, the development officers in the counties and between the banks and local businesses. They should have an established meeting, I suggest on a quarterly basis, to examine all the factories in the area. If there was such liaison at local level between these groups, many businesses who find themselves in difficulties could be steered clear of those difficulties. I believe also that at national level there should be closer liaison with the Irish Congress of Trade Unions, the Confederation of Irish Industry, Córas Tráchtála, the Industrial Development authority and Fóir Teoranta to examine larger companies, and on a national basis to examine the difficulties that are arising daily in industry throughout the country and to recommend remedies before it is too late.

We have a situation throughout the country where the meat companies are on a three-day week because of the exporting of cattle on the hoof. The employment content in the processing industry in the meat companies is massive. There is a movement in that industry towards high technology which is, in itself, a high employment content area. If this were properly structured there is great potential here for very considerable employment at local level. These meat companies employ local people from rural areas in the hinterlands of the towns. The present position is that these companies are on a three-day week. There is a massive loss to the Exchequer because of the assistance it has to give for the two days they are not working. There is a loss of revenue because of PAYE and PRSI, a loss of revenue to the Department of Posts and Telegraphs because of non-usage of the telephones and a loss of revenue to the ESB because of the non-usage of the electricity in these factories. There is also a loss of confidence in the meat business as far as fresh capital is concerned. People are not inclined to invest because of the situation. There is a feeling of despair in the management and staff of these companies. It is not good enough at this time that we should have that kind of a situation in which the Government and Exchequer are actually losing on both sides.

We have a growing young population. There are many people out of work. We have an educational system in which the pressures are so competitive now that the young man or woman starting out is often broken before he or she starts, because the emigrant boat is no longer available as it was in the past.

I served my time, like all my classmates, in England, and many of these have not returned. The young people now refuse to take this option. They will stay at home. They will demand work at home. If we do not provide that work through agencies like Fóir Teoranta, to rescue companies in trouble, to do something about the meat industry, to employ more people, then our young people will have no option but to take to the streets in protest. I believe that it will be a hard option and the 1916 Rising will resemble something like a storm in a teacup by comparison. Our young people will not accept the present situation.

We are driving our young people, by their frustration, to drugs and drink. We should beware of the consequences of our own actions. I welcome the Government's commitment to the National Development Corporation and their present commitment to properly financing Fóir Teoranta by providing the necessary funds in this, the most critical time in our history.

Mr. R. Bruton

In this Bill, we are being asked today to increase the borrowing powers of Fóir Teoranta from £35 million to £70 million. It raises an important question that is in everybody's mind — what value we get for borrowed money. It is in that context that I want to say a few words. I note, by way of introduction, that the Minister for Finance had advanced £33 million by the end of 1980. In 1980 itself, he advanced £8 million. I am a little concerned that the delay in bringing this matter to the House, for whatever reason, may have held up Fóir Teoranta in their work. I note from the data given today by the Minister that the approvals of grants by Fóir Teoranta were significantly down in 1981 as, indeed, was the number of jobs assisted, from 8,700 in the 1980 annual report to 5,500 this year and the grants approved from £12 million to £5½ million. It would, indeed, be very worrying if the valuable job they are doing was held up.

Coming back to the question of borrowing, over the years of their operation, 1972 to 1980, Fóir Teoranta have relied 70 per cent — £7 out of every £10 — on borrowing by the Minister for Finance, advanced by the taxpayer, essentially, who picks up the tab there. Low interest is charged to Fóir Teoranta for that money. In effect, at the end of 1980 there was an implicit subsidy, from the taxpayer, of £5 million which does not show up in Fóir Teoranta's accounts as a subsidy. For clarity in the taxpayer's mind as to what exactly he is paying for, that should be clearly stated in their accounts. That is not intended as a criticism of their operation.

The question I would like to ask them is what value are we getting for our money, or how effective is Fóir Teoranta in its present operation. The evidence which the Minister cited and which was also cited in the Joint Oireachtas Committee report was that about one-third of companies assisted failed and about one-third are back in profit, with the rest continuing to struggle on. In effect, one in every two cases dealt with is a success, one ending in job preservation on a long-term basis and one ending in closure. This has to be viewed against the criterion that the company is working on, which is that it is only companies who have a reasonable prospect of returning to prosperity and profitability in the long term and meeting their commitments will be assisted. The evidence that one out of two fails certainly raises certain questions as to whether that criterion is being applied properly. If it is not, it may not be the appropriate criterion, but it is the one set up and that sort of rate is a bit worrying.

I did not find out from the report on Fóir Teoranta and would be interested to know, while one in three is failing and one in three is back in profit, how many of the jobs are failing. In some of the companies which go back into profit, a significant number of the jobs may be lost. We are perhaps getting a more favourable view of just the success ratio in preservation of jobs by Fóir Teoranta.

The really worrying thing revealed in the Joint Oireachtas Committee Report on Fóir Teoranta is that half of the companies helped come back a second time to Fóir Teoranta for further help. In terms of the penal code, this is recidivism. Something is definitely awry when a company who have supposedly made the management changes necessary to restore profitability and been given an injection by Fóir Teoranta have to come back a second time. It suggests that the amount of money going to the successful cases may be much lower than we think.

In terms of the actual amount expended on companies getting assistance, it may be of interest to the House that the average amount of capital spending, in 1980 pounds, paid out per job assisted came to £2,600. That means, in terms of jobs saved, if we take the ratio that one is saved and one is lost, that the total amount that we are putting in to save the job would be about double, plus a contribution from the IDA. You would be talking about something around £7,000, in 1980 pounds, per job saved. That would be more in current funds, of course and is quite expensive. That raises some questions. Granted, that saves, presumably, the £1,500 redundancy payment which is drawn attention to. Also, it saves a recurring amount of about £2,000 in unemployment payments. When looked at in that context, it does not compare dramatically favourably with the sort of operation that the IDA are engaged in, where something of the same order of magnitude of money is being put in. In that case, it is for a totally new job.

It is an aspect that needs more careful investigation—whether, perhaps, we are assisting a number of companies which do not in the long term have any prospects, thereby pushing up the cost per job saved beyond what would be reasonable for the taxpayer to bear. The financial implications in Fóir Teoranta's accounts are that they are writing off about one-third of all the loans that the Minister for Finance advances to them. That should be borne in mind when we are considering this. They also receive only about one-third of what would be regarded as a commercial return on the money they put into loans. What this has meant, in fact, is that the interest collected from the companies they have helped is no longer even covering the expenses of operation of the company —that does not mean that in the past the interest collected had been far in excess of the expenses of Fóir Teoranta. So there is a deterioration in their ability to operate in a self-financing way.

The faults in their operation are represented mainly by this problem of recidivism, the fact that some companies are coming back a second time. That is the key problem that Fóir Teoranta should address themselves to at this time. Presumably those companies that come back a second time are getting about twice the amount of help as companies who are successfully going through the operation and getting themselves back into profitability. The question this raises is: are we putting off the evil day? In those companies we are financing losses temporarily and, perhaps, during that temporary financing we are postponing the needed changes in the company and at the end of the day when they are put into liquidation the chances of salvaging may be that much worse since they have had another couple of years to slip backwards.

Implementing effective changes in the management of companies in trouble brings us up against a serious political problem for Fóir Teoranta which we have to take account of. Certainly in a small area, if Fóir Teoranta refused to give financial assistance to some company because the existing managing director refused to step down as a condition of getting financial assistance, that would cause an awful political uproar in the area. That is something we have to face up to. We have to look at it politically in a mature way. There is no point in trying to shore up companies because of political pressures if there is not a genuine chance of survival there. I will come back to that point later on.

The real question then is: if Fóir Teoranta on the occasion of giving out financial aid list the management changes they regard as necessary, why are these changes not carried through and why does the company come back a second time for another dose of the same medicine? One possibility is that Fóir Teoranta's attitude to companies coming to them is to advance money in dribs and drabs. That may be self-defeating because a company gets a certain amount and does not implement the necessary changes; things do not improve in the way they hoped and they have to come back again. Fóir Teoranta might look into this.

It is notoriously difficult to set standards for control of a company such as Fóir Teoranta. The question of setting standards is the great challenge being presented to politicians, at present more than at any other time. Some of the people here will have been watching "The Late Late Show" the other night. It did not reflect well on politicians of any persuasion. They seemed not to be facing up to the issues in a fashion that was workmanlike enough. This case gives us an opportunity to look hard at public money that is being spent. Certainly Fóir Teoranta can rightly point to the enormous benefits that are coming from their operations, namely, preserving jobs, saving redundancy payments and saving social welfare payments and giving extra tax. They are certainly things that have to be brought into assessment. We are right to give the job of assessing these things and the value for money to an independent body such as Fóir Teoranta. But I would like the Houses of the Oireachtas to have effective checks retained for them. These are borrowed funds they are using and we could use those borrowed funds in other ways to create employment. The question of preserving jobs can be over emotive. We should be aware all of the time that by preserving a job we are also giving up the opportunity to use that money to create some other sort of job.

Coming back to controls, I do not believe that the control at present in operation, namely, that above a certain amount — previously £250,000 and in future, the Minister tells us, to be £1 million — ministerial approval is required. I do not think it is of particular benefit. It is suggesting that the management of Fóir Teoranta can only be given responsibility for certain sums. We should have the courage of our convictions. When we set up a body such as this we should give them clear responsibility and allow them to operate. What I would like to see, as a check on how they are doing, is that they would be charged the interest on the Exchequer advances they were given, so that each year we would have an explicit view of the proportion of money that was a current subsidy to them. At the end of 1980 they had outstanding loans with their companies of £17.4 million. The interest on that would be about £2½ million. The interest they actually recouped from those companies was only one-third of that sum, so that they were effectively getting £1.7 million in a current subsidy. I would be concerned to see the position where, if Fóir Teoranta were unable to get back even a third of the implicit interest they should be getting, it would be a warning signal that we could watch out for. I would prefer to give them freedom in their operation, but asking questions in the event of a situation like that deteriorating.

As the management themselves say in Fóir Teoranta, they operate as a financial institution and therefore we should set a financial criterion such as that to check how they are operating. I am not asking that they should cover their interest in its entirety, because by the nature of things the sort of work they are in is such that they cannot cover everything. These are firms in trouble. They are not able to meet their payments. At the same time there should be a limit beyond which we do not go. That sort of criterion would be very valuable for us in looking at what value we are getting for the taxpayers' money.

The second possible criterion we could use is the proportion of money that they write off each year of the advances outstanding. This is effectively taxpayers' money, money that we have borrowed from foreign banks or elsewhere that Fóir Teoranta are having to write off completely. In 1980 they wrote off £2.7 million out of their outstanding loans of £17.4 — in other words, 15 per cent. Again it would be worrying to see that proportion rise from 15 per cent. That again would be a warning light to the taxpayer, to the public at large, that Fóir Teoranta were not staying within a reasoned approach to their criterion, namely, that only firms with prospects of returning to prosperity and profitability should be assisted.

Then there is the question of the operating of Fóir Teoranta themselves. The Joint Oireachtas Committee drew attention to the fact that they have six management executives, people who are available to advise companies on difficulties and to go in full time, if necessary, to take over as managing director to see that the changes needed to bring the company around to profitability are implemented. This has been one of the most successful elements of their programme. Certainly in cases where they have put in a full-time managing director there is no doubt that the changes they saw as necessary were implemented.

I understand that there are six people in such positions and public money would be well repaid if there were more Fóir Teoranta employees who were in a position to go in to bring about management changes. That would possibly be the most effective way. Admittedly, there would be problems where the owner of a company was involved in the equity. However, managers could go in in an overseeing capacity even in such cases.

The Minister pointed out that the joint committee suggested that the banks should take a more active role and provide extra facilities under Fóir Teoranta guarantee. The Minister said he does not foresee any changes in that. I am not satisfied that no changes should be made. The banks have a social role which all parties agree they are not playing. They are not making sufficient social contribution. In this area more than in any other they would not only have a contribution to make in financial terms but also in terms of expertise that would significantly improve the operation of Fóir Teoranta. What I have in mind is that they would not only provide extra facilities and, to some extent, take up part of the risk that is borne entirely by Fóir Teoranta at present—that would be a financial contribution—but they also could make a very useful contribution in serving as an early warning mechanism. They perhaps more than anyone else would know when firms were running into difficulty and could bring this to the attention of the Government and Fóir Teoranta. The Tánaiste in recent speeches drew attention to the fact that in some cases they discovered the difficulties firms were experiencing too late to do anything worthwhile about them. If we brought the banks into this more actively perhaps that situation could be remedied.

I should not like to give the impression that I am being negative towards Fóir Teoranta. I am confident that they are doing a very good job in difficult times but I should like to see stronger financial checks. There are two aspects for which I commend Fóir Teoranta. Firstly, they are subcontracting the bureaucratic element of their operation to the ICC. They are using resources that are there already and this is good example for other semi-State bodies particularly in a situation where we are envisaging setting up a new agency in this area. It would be a shame if they all got their own accountants, secretaries and so on as this would push up costs. Fóir Teoranta are exemplary in keeping down that cost.

The other point which is exemplary in the case of Fóir Teoranta is that when taxpayers' money is put into companies it is on the basis that interest has to be paid back on it. One of the criticisms I have of the operation of the IDA is that when they give out money there is absolutely no claw-back for the Exchequer, not even in profit taxes. Fóir Teoranta are providing funds on a much more business-like and cost-covering basis than the IDA. That should be taken into account when considering the amount of money devoted to saving a job compared to the IDA, spending for jobs.

In conclusion, I should like to mention a few things that were raised in the course of the debate. First, there is the point Senator O'Leary made that there should be an expansion of the equity side of Fóir Teoranta's operation. To be honest, I sympathise more with Fóir Teoranta's own attitude towards this. In cases where Fóir Teoranta become substantial owners it is much more difficult for them to operate in a reasonable way. They increase the political pressures involved if they permit a receiver to go in and do not keep putting money in. If they are owners they will be seen to be much more responsible. The other point which seems to be implicit in what Senator O'Leary was saying was that if we advanced equity to these companies the taxpayer would be expecting no debt service or return from the money. We should expect some return. I should not like to see the shift to equity mean simply that they get money for nothing.

Senator Hillery brought up the very important question of long-term survival and the problem of how we can get a more constructive management approach to it. I am not sure that I go along with him altogether in the belief that the answer is simply education. To some extent agencies such as Fóir Teoranta should have people who are concerned with the more innovative side of industrial policy as well as accountants and so on. These people should look at the products the company are producing and see what their long-term future is and also the market situation. If Fóir Teoranta had someone on their operation who was informed in that area it might be a useful addition to their operation rather than hoping that education will in some way solve the problem in the distant future.

As regards Fóir Teoranta assisting foreign companies, I do not know how they ensure that the money they put into a company does not preserve jobs in the home-base of the company rather than in the Irish operation. That is something I should be interested to have information on.

Mrs. Robinson

This Bill concerns the most important social issue facing us as a people—the unacceptably high unemployment rate and the evidence of further redundancies in the pipeline. I share the concern expressed by the Minister and Senators who participated. This is the most serious problem facing us as politicians. I have decided to contribute on this Bill because the debate so far has not considered at a deep, serious level the nature of the problem and how to resolve it.

The unemployment figure is at an all-time high. This Bill proposes to double the capital that can be borrowed by the State rescue agency, Fóir Teoranta. That is only a very partial response and the debate has been a partial response to the immensity of the problem. Not only have we the highest unemployment rate we ever had but we also have a richness and a wealth in a real sense but nevertheless an added dimension to that problem— a growing number of young people coming on the labour market without any prospect of employment. In the context of discussing increasing the capital that may be available to a rescue agency, we must also address ourselves to the underlying extremely serious and challenging problem.

References have been made by Senators to the need for improvement in management, particularly in the firms which are at risk and come to Fóir Teoranta. Emphasis was placed on the need for better industrial relations, on the need for an effective early warning system and on the desirability of better liaison between the existing State agencies and the banks and other finance bodies at local level. I agree with all of those points. There were a number of positive and constructive suggestions but I still feel that we are scratching the surface of the real problem. Jobs are being lost in Irish industry at a frightening rate and more and more young people are being faced with the prospect of not getting a job in the immediate future, not getting a job in the medium term and perhaps never getting a job unless we are prepared to influence the forces that have created this situation and to act on them much more positively than we have done. Therefore we need more than an effective early warning system. We need a much more concentrated effort on behalf of the whole community to develop preventive measures, to prevent the loss of existing jobs and to develop further job opportunities for our population.

This is a very difficult and almost intractable political challenge, but before we can face up to it we must identify it. We have to face up as a community to the urgent necessity to have a much more developed strategy to prevent further loss or erosion of jobs, to prevent further job insecurity, further redundancies. In order to do that we have to communicate the nature of the problem and this is where political responsibility and the role of and challenge to the Government come in. Any body in a public representative capacity has a potential to communicate the need for a response from the whole community, the employed, the unemployed and those going through the educational system hoping to become employed. It must be done in the context of the kind of society that we have in 1982, in the context of the forces in our society and its potential. Reference has been made, in particular by Senator Hillery, to the very positive factors in our society, to our young and better educated work force and to the potential for greater development of our resources. It is these on which we need to build as part of the overall preventive strategy and also a positive strategy to create new opportunities for employment and for developing industries.

The nature of the problem and the way it is outlined in the Minister's speech requires a different kind of response from us, a radical change in our approach as politicians and in the way we speak about the problem, in the way we communicate it and act upon it. It appears to be necessary for us to enter into a radical open dialogue with ourselves, the kind of open discussion which occurred in France in 1968 when there was from the grassroots and also higher up in the educational system a felt need for radical change, a need to change direction in a very important area in life in France at the time, an area which was very structured, very rigid, very stratified. The capacity to change came because of the extent of the dialogue which was opened up, the extent of the communication. We need a similar type of opening up of the lines of communication, an awareness of the nature of the problem, an awareness of the collective responsibility of decision-makers and of the whole population at large, in every town and every village and in every workplace. It is the challenge facing us as politicians to creature structures of participation and structures of dialogue and communication which enable us to face the problem and to develop the resources and wealth of the country in order to overcome and surmount that problem. We cannot do it in present circumstances. We will drift into higher unemployment and switch off a whole young generation which will not have an opportunity of participating in our society. Therefore we must change the approach and change the nature of our perception of the problem.

It is very interesting to note, not just in this country but in other countries where there are severe problems of unemployment, that frequently when a receiver comes in and a plant is closed there is a takeover by workers in that plant. It may be by way of sit-in or by way of a workers' co-operative which is assisted by local bodies or by the State. It may happen in a planned way or it may happen in an unplanned, desperate way by workers who want to secure their employment. Why do we have to wait until the firm has become unviable and has closed for this kind of activity? Why can we not, as part of the approach which places emphasis on preventive measures, on the prevention of loss of employment, have much more attention paid to the possibility of increasing participation by workers, development worker co-operation and structures to keep a plant viable and motivating the employees in a plant by ensuring not only that they have access to a very accurate picture of the potential of the firm but that they have an opportunity to influence the future strategy of that firm faced with the possibility of either further redundancy or of loss of employment?

Much greater empasis should be placed on stimulating in employment in the private sector a dialogue, an assessment in each workplace of the employment potential and the employment prospects in that workplace for 1982 and future years. There should be a very accurate flow of information and full disclosure to workers in that workplace. There should be an openness by management and employers to listen not just to the trade union representatives, though obviously it is important to listen to them, but also to the workforce at large, to the workers in the particular plant or factory where problems are occurring or even where there are no obvious problems now. No workplace in Ireland is free from the prospect of very serious problems in the near future because of the competitiveness of the modern market and the influences of modern technology.

Under these twin pressures it is imperative, as part of our approach in increasing funds available to the rescue agency to try to maintain certain manufacturing plants as viable units, that we also have a much broader and more radical approach to the kind of measures that can be taken, to the kind of climate we can create, to the physical resources which can be developed, and to the manpower resources which can be harnessed much more effectively, which can be listened to and which can be brought in in a more positive and more motivated way to secure and develop jobs.

The increase in the potential capital available to Fóir Teoranta is only one small part of an overall picture, and very much part of that picture I would hope in 1982 will be the role and potential of the National Development Corporation. The Minister, in introducing this Bill, did not refer expressly to the National Development Corporation. I would like if he would, in his reply, refer to the potential of the National Development Corporation for further job creation and development of the resources for maximum value added potential in Ireland so that we do not export, as we are doing in the meat industry that potential for job creation but rather develop it for ourselves.

One final comment arises from the references by the Minister and a number of Senators to the report of the Joint Committee on State-Sponsored Bodies on Fóir Teoranta. That was a very useful report. The Minister was a very prominent member of the State-Sponsored Bodies Committee. I would like to draw the attention of the House to the fact that that committee disbanded as did the EEC committee when the general election was called and it has not been reconstituted. We have had no State-sponsored bodies committee for the last seven months. We have a staff for the State-sponsored bodies committee and that staff are not declared redundant when there is no committee. Being in the public sector the staff are shielded from that but the staff are idle while important work remains to be done. There are a number of other State bodies whose work needs to be examined and the committee have a very important workload as have the EEC committee which also require to be reconstituted.

An Cathaoirleach

That hardly arises on this Bill.

Mrs. Robinson

I have referred to the value of the report furnished by the State-sponsored bodies committee. In the past it has been the all too frequent experience of Members of this House that we are asked to authorise further borrowings. This is usually only a measure involving a single section of a Bill. There is usually no explanatory memorandum and there is a very brief speech introducing it. We do not know what the basis is. Here we do know. We have had an assessment by the joint committee of the work of Fóir Teoranta and that assessment has been a fairly positive one.

The intention to double the borrowing capital which will be available is a necessary and an important one which both sides of the House will support. Since this is the first measure dealing with unemployment the House has taken in 1982 it should give us an opportunity to mark the highest level of unemployment the country has faced and the serious threat to existing Irish jobs which is posed over the coming years, the very difficult and intractable economic forces which are at play and the need, in that context, to have a quantum change in our approach to employment and unemployment, the need for a collective concern about it, the need for opportunities for employment impact assessments at different levels and the political responsibility of the Government and public representatives to bring home at a very public and psychological level the collective interest which we all have in the difficult job of preserving and maintaining existing jobs and the further challenge to create new jobs. I support this Bill but I hope it will form part of a broader debate during 1982 on how we can, in a planned social context, maintain, secure and provide new jobs for our population.

Mr. Lanigan

I welcome the Bill but I wonder what value will it be in the long term. Fóir Teoranta were set up as a fire brigade operation which could deal only with problems which arise in the manufacturing and mining sectors of the economy. While I agree that the manufacturing sector of the economy is of vital importance to this country and the mining sector is also of very grave consequence, there is no way in which this Bill does anything for the service sector of the economy, which is a major employer. The jobs which are provided in the service sector are not in any way State subsidised.

There is, throughout the Minister's speech, a cohesion as between the role of the IDA and the role of Fóir Teoranta. It would seem as if Fóir Teoranta are basically going in to solve the problems which have been created possibly by ill-advised industries being set up by support from the IDA. Would there be such a need for Fóir Teoranta if a much more severe look was given in the beginning to the viability of the projects which the IDA approve? In some instances we had Fóir Teoranta going in to rescue firms in which the directors and the capital for these companies came from breakaways from existing companies.

Throughout the country at present there are engineering firms in trouble. In the beginning there was an economically viable engineering firm and suddenly five or six people left that firm to set up on their own; they were helped by the IDA and then possibly one of them got into trouble and Fóir Teoranta had to assist them. The basic principle of the strength of the original operation was broken down and Fóir Teoranta had to come in. One wonders whether it would have been better for the IDA to strengthen the original company rather than break it up into smaller firms.

The transport industry is vital to the survival of any manufacturing entity within the country and still there is no way in which the transport industry gets one solitary bit of help from either the IDA or Fóir Teoranta. The creation of jobs within the transport industry is dealt with either by CIE or by private industry. CIE are not able to compete with private industry in the transport sector. One wonders should there be a change over in the transport of manufactured goods from CIE to private transport.

In the agricultural sector there is no way in which anybody can be helped by Fóir Teoranta at present. Is this right? Our basic industry is precluded from help from Fóir Teoranta. Surely our agricultural industry should be helped by any rescue agency set up by statute? The IDA recently set up a services division which will provide support services for computers and the provision of computer software for companies abroad. But this is of no use when one speaks of what the average person would call our services sector. There is no manufacturing entity which can stand on its own feet without the help of services to support its machinery and to keep its transport going. Why cannot these people get a bit of help when they get into trouble? Why should the manufacturing end of industry always be the area in which State money is spent? Why should the IDA not be able to supply money for the provision of jobs in the service industries, when up to now they have not gone either to the IDA or to Fóir Teoranta?

The unemployment situation we hear about is emphasised more in terms of the bigger firms, but there is an underlying loss of jobs, which is a matter of urgency, in the smaller firms throughout the country, firms which up to now have been employing four and five people but never got a penny in State help. They are losing a quarter of their jobs — and that may be only one job in certain instances.

As a "fire brigade" operation, Fóir have done very well for a number of companies. If Fóir have to go in to rescue a company, the criterion supposed to be set down is that that company should be financially viable and able to produce a profit. Senator Bruton mentioned the social responsibility of the banks, but if a firm is financially viable the banks should allow it to trade out of its difficulties rather than stop the inflow of cash and leave the company to be rescued by Fóir Teoranta. If a company are trading profitably, there should be no need for Fóir Teoranta to go in. There must be something wrong with our banking structure when a company which is financially sound and capable of making profit, have to ask Fóir Teoranta to help. There should be a financial institution capable of providing the finance required. If there is a lack of confidence by the financial institutions in management and staff, I do not think Fóir Teoranta will get that back.

I would like to know the present success rate of companies into which Fóir Teoranta have gone in relation to pounds spent. How many jobs have been saved? How many firms have Fóir Teoranta gone into in the past 12 months? How many of these companies are now trading on a profitable level? What is the return on Fóir Teoranta's investment for re-investment in other firms? That figure is important because to the ordinary public Fóir Teoranta appear to go into an ailing firm, protect them for a number of months and inevitably the firm go out of business, with no return to Fóir Teoranta or to the Government. According to what I can make out, it does not look as if Fóir Teoranta are a priority creditor when a company goes bankrupt. Have Fóir Teoranta the same protection in priority as PAYE, VAT or taxation, because taxpayers' money is going into these firms? Therefore, Fóir Teoranta should be a priority creditor in the same way as the PAYE capital taxation, trading taxation or VAT. Judging by the rumours we have heard about impending closures and lay-offs, the number of calls on Fóir Teoranta over the next few months will be enormous.

While a doubling of capital from £35 million to £70 million might seem a great deal of money, in terms of the numbers of jobs at present at risk it is a little drop at the end of the bucket.

Dr. Whitaker;

This is a necessary and well-justified measure and I welcome it. As Senator Robinson said, job creation and retention, unemployment and job losses, are vital matters of policy. I do not intend to discuss them now hoping to have an opportunity of doing so on the Appropriation Bill. I would not have risen to speak on this Bill except as a reaction against the eloquent but to my mind insidious arguments of Senator S. O'Leary in favour of directing Fóir Teoranta to adopt a softer line — in other words, to provide equity capital subscription on a much more liberal scale instead of interest-bearing loans. He has not persuaded me. On several occasions in this House I have criticised the otherwise admirable reports of the Joint Committee on State-Sponsored Bodies for giving too ready an ear to a pseudo commercial argument in favour of injecting massive State equity into ailing State bodies without any prospect of substantial dividends coming forward in the future. I find Senator S. O'Leary's arguments difficult to reconcile with the expectation I have, and which I hope many others share, that next week's budget will do something to switch State borrowing to more productive purposes.

Fóir Teoranta, as its name implies, is a rescue body, not a holding company and certainly not an adoption board. In the corporate industrial context I think one should be seeking to rescue live bodies, not dead ones, or at least bodies with a capacity to live. The test is, therefore, one of viability, which means being able to pay its way and remunerate capital, whether it be loan capital or share capital, over a reasonable term of years. The difference between share capital and loan capital may be exaggerated in the Fóir Teoranta context. Not having to pay a dividend for a period of difficulty is not all that different from having a moratorium agreed on one's interest on loan capital or having the interest rolled back for a period as very often happens when arrangements have to be made for the rescue of companies in difficulties. We all see that these arrangements involve also the giving of moratoria or the rolling back of interest by financial institutions as well as by a State body.

I would very much favour leaving it to the good judgment of Fóir Teoranta how they conduct their rescue operations and I certainly would not want to direct them into the provision of share capital rather than loan capital. The arguments, which Senator O'Leary very honestly read out, against share capital, arguments which were made by a previous Minister for Industry and Commerce, remain valid.

One cannot get into any company by way of a substantial share capital subscription without necessarily taking on many of the obligations of proprietorship, an obligation to decide what to do about the business in future, an obligation to manage it and, of course, the very regrettable obligation of deciding to shut it down if after all one's efforts it cannot survive. I would leave it to Fóir Teoranta. I would do so especially when I consider how little evidence there is that they are hard-nosed Scrooge-like financial operators. The Minister has told us that of the cases they assist only one-third manage to survive and trade profitably. I gather that in so far as they receive repayments on their loans these repayments cover only about one-third of their total help for the industries they have assisted. That is good enough evidence for me that they are considerate, that they take risks, that they are not refining down too much their concept of viability and that they are in no need of any direction to be more liberal.

Minister of State at the Department of Finance (Mr. B. Desmond)

I should like to thank the Senators for their contributions to this debate. Quite rightly a great deal of the emphasis in the debate has centred on the employment question and the extent to which Fóir Teoranta can assist in maintaining and protecting industrial employment here. The fact that there has been a recently published figure of 141,000 unemployed, as of the latest monthly returns, very significantly masks what I regard as the crisis proportions on the employment front. I say that advisedly because I have argued vehemently, and will continue to do so throughout this year, that all our scarce national resources and every shilling of productive resources here must be, if we are not to have a crisis situation, diverted deliberately into productive job creation, job maintenance and protection.

One can be accused of being no more than a peddler of gloom if one constantly reiterates the reality of the situation. This can be very demoralising for many Irish people, particularly young people seeking jobs; but if one does not start from a base of reality one is wasting one's time The reality is 141,000 unemployed. Notified redundancies for 1980 were over 14,500 and the indications are that notified redundancies for 1981 will be 17,500, closer to 18,000 when one gets the final figure. If one takes 1980 and 1981 alone, notified redundancies in industry total 32,000. As Senators are aware, notified redundancies only relate to persons who are probably going to be entitled to statutory redundancy payments. The gross losses in manufacturing industry in 1980 was 27,000. One can deduce from that that, if there were 17,000 notified redundancies in 1981 as against 14,500 in 1980, that figure of 27,000 must be substantially higher for 1981. It may be 30,000. It means that in the past two years there have been 60,000 gross employment losses in the manufacturing sector and that fact does not seem to have dawned on the Irish people yet. Were it not for the work of the IDA in 1980, work which has inevitably slowed down in 1981, the picture would be utterly grim and the unemployment total of 141,000 would be close on 200,000 today. Despite all that the net situation, therefore, is that we are about 10,000 down on the net situation in 1981. The situation is quite critical.

We have had many references to firms in difficulty here. If there is one thing which I learned, and which my colleagues Senator Hillery, Senator Eoin Ryan and those of us who served on the joint committee learned when we investigated Fóir Teoranta it was that our entrepreneurial tradition generally is rather weak. We are not yet a vibrant and strong industrial nation. The desire of the average Irish person with an average amount of money — if there is such a person in existence — to put his money into a financial risk-bearing enterprise in a private manufacturing company is exceptionally weak. This is contrary to the attitude of the French or of the Germans who are adventurous when it comes to making money on a profitable basis. The innovative competence of our own people in the manufacturing sector—

Mr. Lanigan

Would it be that in other countries there is, for the person who wants to go into an entrepreneurial situation, a better chance of getting a return than is the case in this country?

Mr. B. Desmond

What other best incentive can one give? I should like to develop the point briefly before going on to the actual aspects of redundancy. Unfortunately, in this country we tend to invest our money in land, pubs, supermarkets, in property, all of which have very safe investment levels. We put a great deal of money into the services sector in terms of investment. Of course these services suffer dramatically when the manufacturing side gets a crucifixion because they have very little to do. Therefore, there is a real need for us to develop a climate and an attitude and, above all, an education system based on technological development whereby our people will willingly take risks in productive, manufacturing enterprises. That is our only hope. Fóir Teoranta are prepared to help those firms, particularly in the manufacturing area, who might be in temporary difficulties, especially those who export. Fóir Teoranta should certainly give them every possible help.

I should like to disabuse the House of any idea that this Government are going to bail out, irrespective of their prospective viability, even in the job-crisis situation we are in, those firms who have no prospect whatsoever of regaining profitability. That is not the job of the IDA, of Fóir Teoranta or of the Government. Arguably it is far more the job of some banks than has been the case up to now. It is certainly not the job of the State to do for managements in the running of their private enterprise what they must do for themselves in maintaining their own viability because the exercise in the long run is totally self-defeating. I do not think we should let it go out from the House that there is easy money anywhere to be got in the State in maintaining such companies because the political pressures at the moment are intense, enormous and all-pervasive. Even some major multinationals and some strong Irish financial groups who take over a multitude of firms and who then have one or two who are ailing automatically regard the State as a soft touch to bail out the ailing firm and get it back into some element of transient profitability. That is certainly not the function of Fóir Teoranta and it is something which will be resisted very strongly by the Government in the years ahead. Despite the fact that unemployment is likely to grow we cannot indulge in panic financial measures.

Therefore, we have to devise a far clearer strategy towards encouraging domestic Irish indigenous firms particularly into the export markets. For example, if one comes across a clothing firm tomorrow morning which have a high proportion of their output going to exports and they are in temporary financial difficulty due to, say, the temporary collapse of an export market, by all manner of means Fóir Teoranta will move in and immediately endeavour to help that kind of firm, because that is where the money should be going. I would strongly urge that that is where financial resources should be geared.

Senator Fallon raised the question of extending Fóir Teoranta's activities to other sectors, including agriculture, and also to small firms. It is important to point out in relation to agriculture that Fóir Teoranta do not get involved in the agricultural business. As we know, that sector employs a considerable number of workers. Naturally, the Minister for Agriculture has been pursuing quite actively the problems of individual firms in that sector and of individual farmers and his Department are best equipped to deal with some of the complex problems in those areas. Fóir Teoranta give priority to agribusiness firms where they are in particular difficulties. There is no great inhibition in that area.

Senator Fallon also raised the question of priority being given, through the management services unit of Fóir Teoranta, to such small firms. Certainly Fóir Teoranta are extremely conscious of the needs of such firms and the farms services unit will be readily available to any firm in that area to assist these conpanies.

We know that many of the closures which were scrutinised by Fóir Teoranta in the past few years have arisen from bad management, ineffective management, or from the absence of adequate information systems within companies, or a total inability on the part of some compamies to react to change. Many firms, even in the private sector, often embark on entirely unrealistic manufacturing projects. However, there is an area which is under the direct control of Irish people, and that is the area of industrial relations. Admittedly, any firm can go to the wall due to the sudden shortage of owner funds, but it takes a fair bit of a whack and a long period for a firm to go to the wall simply arising from a bad developing industrial relations situation. I referred earlier to the critical importance at this juncture of our economic development of avoiding unneccessary and undesirable industrial disputes. I had some critical comments to make on the prospects of a dispute which might involve the maintenance craft workers against the member firms of the FUE. I stressed the futility of the prospect of such a dispute, more particularly when that dispute would be far more concerned about what one might call industrial power structures within the trade union movement rather than the advancement of the living standards of the particular craftsmen concerned. I had that view and I have shared it for a long number of years. I certainly hope that this tendency will be strenuously resisted by the ICTU, the FUE and the Government.

One can think in terms of there being in the past 12 months 17,500 people who were declared redundant. These would be persons who were more than two years in employment. At the same time there is a dispute in Tara involving 1,000 workers. I would stress very strongly that we have lost nearly 60,000 jobs in the past few years, that today there are 141,000 out of work and we have had 17,500 redundancies in the last 12 months alone, and we have spent £260 million on unemployment benefit and aid for small firms. Therefore, our exports drive must be maintained if we are not to have a critical balance of payments situation. We need disputes, particularly like that at Tara, like we need a hole in the head. Our attractiveness as a manufacturing base must be preserved and developed. These kinds of industrial disputes cause untold damage to the work of the IDA, Córas Tráchtála and of Government Ministers trying to attract foreign industry into this country or to get existing firms to develop here. Therefore, I hope that that dispute in particular, where a solution is within the competence of the parties concerned, will be solved in the near future. Accordingly, I welcome the final intervention of the Labour Court.

Senator O'Leary raised the question of the possible extension of Fóir's activities to the service industry when we are reviewing the Bill. Senator O'Leary's comments will be borne in mind when future legislation is being drafted. However, we have to take account of the critical importance of the manufacturing sector of our economy because without it the service sector can do very little. It is vital to preserve a healthy and expansion-oriented manufacturing sector. If we are to achieve this through the work of Fóir Teoranta then we will work in that area. I agree there is a need to examine the services sector. It has a high employment content. It may be possible, although I give no assurances, to reappraise the role of that sector in the context of the revision of Fóir Teoranta legislation in the years ahead.

Senator Robinson raised the involvement of workers in their own enterprise. There is a very serious inadequacy in regard to Irish company law legislation relating to information being made available to workers. Nevertheless, very often trade unions in industry only make approaches to Government, to individual Ministers and to State agencies after the receiver has moved in and when the liquidator has taken over. It is arguable that despite the deficiencies of the company law information outlets, workers inside most industries have a fairly acute anticipation that things are going wrong well in advance of the receivers, even where managing directors, accountants or production managers cloak matters, particularly financial matters, hide them and deliberately keep them back and perhaps do not pay PAYE or VAT returns to the State and so on. Nevertheless, from what is being produced on the floor and from the climate one can smell in the company when one walks in the door, there is an obligation on the part of unions to be much more up-coming, if one might use the phrase, in bringing to the attention of the State and State agencies their concern about the future viability of the companies in which their members are working. There is an obligation, therefore, for an internal early warning system to be operated within the trade union movement so that it is more constructive, positive and concerned. Therefore, I urge the trade union members in their day-to-day employment to exert their own capacity to alert the State to the areas of concern within their own sectors. That will be of some help although it does not in any way diminish the necessity to amend company law so that there is far more disclosure. The report of the joint committee was critical of those companies which deliberately mask critical situations in the hope that the banks, the Government and their creditors will not find out, with the result that it is far too late for Fóir Teoranta, the IDA or any other State agency to give any assistance.

Senator Robinson raised the point that unemployment is a major problem which raises serious political challenges on all sides, requiring radical change and radical measures. I agree with the Senator's contribution. Some of the points we faced up to here this afternoon are of major importance. When one stresses the unemployment situation at the moment, the balance of payments, inflation and the current budget deficit, all of which are inter-related and have a direct impact on employment, one can see that none of these problems can be solved in isolation. There have been pathetic sit ins and workers bereft of work having their earnings reduced to about 60 per cent, even though they are on pay-related benefit. There is a myth about how well people do when they get a couple of thousand pounds redundancy money and when they go on to pay-related. We should all do that every couple of years and we would rapidly cure the mythology which is all pervasive in that area. It is pathetic when management take up their tents, float off into the night and workers remain behind sitting in. One must ask why sit in? Workers, generally speaking, have very little experience of running enterprises; very often they have very little awareness of the marketing expertise required to export the particular products they may have been producing for 20 years. That brings me back to the basic, urgent point. That is the capacity within our people to adapt and innovate, to have management competence and ability to run our own enterprises and have a tradition of this internally devised, starting with our educational system. One can sit in for 20 years but if one does not know how to run a company, how to export, or to speak a foreign language, telephone France or Germany and talk to customers and ask them to buy one's products, one is wasting one's time. They are sitting in for the rest of their lives and these are the realities of the industrial environment we have today.

I hope, since Senator Robinson raised the point, that the National Development Corporation will make a contribution, that it will be distinctive and quite effective in some sectoral areas but I do not regard it as a panacea for all the problems. There is also a myth that if one sets up State enterprise agencies and State development corporations, then automatically jobs will flow. Industrial life, exports, management and investment are rather different from that kind of assumption. While I accept and I strongly hold the view that the National Development Corporation can make a major contribution, we should not regard it as a total panacea for all problems which the industrial sector faces.

Senator O'Leary said not enough was being done by Fóir Teoranta to inject equity. He got an answer from his colleague, Senator Whitaker, in that regard. I take his point. I would hold the view that in a number of cases Fóir Teoranta invest in equity. I must stress that this can give rise to very serious problems with existing shareholders. In some cases Fóir Teoranta invest in preference shares with extremely low, effective interest rates. It is a policy decision of the board that they should not acquire majority shareholdings in concerns. We all know the implications involved. It is bad enough to try to handle a bad case with political pressure being exerted on the Government in relation to State aid, but in trying to deal with it when the State has a majority shareholding in a company which has only a marginal prospect of viability, the pressure becomes altogether intolerable. Therefore, there is a case for State equity, or for direct equity, but it should be of a very limited amount. The Senator will appreciate that, when the worst happens to a firm, namely closure, Fóir Teoranta lose significantly, and can lose very significantly if they have a major equity shareholding.

Senator Bruton raised the question of the overall State deficit in this operation. It is fair to say that one-third are marginally successful and the rest go to the wall. He pointed out that there can be irrecoverable losses. The accumulated deficit at the end of 1980 as a result of these losses was about £11 million, representing direct losses to the taxpayer. That must be put on the record. This deficit, incidentally, may have to be written off in the years ahead with the approval of the Oireachtas. We will have to consider that over the next four years.

Senator O'Leary said there was no overview of the timber industry by Fóir Teoranta. He suggested State control of the manufacturing end of the industry. I take the general point that the development of an industry such as the timber industry is more appropriate to the IDA. The IDA are now adopting a much more coherent and structured approach to the needs of that industry. The Minister for Fisheries and Forestry is also involved. By and large the situation has improved with the IDA more directly involved in that sector.

Senator O'Leary said what most companies needed was interest-free capital. We have dealt with that area and, frankly, it is not on. I have no intention of providing interest-free capital. Out of the total expenditure to date of Fóir Teoranta, £35 million pounds, £11 million has been irrecoverably lost. Let us be blunt about that. It has been written off — and that was a major loss — but it contributed towards the maintenance of employment. I would be very opposed to the provision of direct interest-free capital because it is an extremely difficult area. If the argument were carried too far it might suggest that any firm threatended by closure could avail of such a proposition. I am sure the Minister for Foreign Affairs would agree with me that the European Community might have some strong views to express about such a provision. I will leave it at that because it is fraught with considerable implications relative to competition.

Senator Hillery raised the interesting point as to whether I should be here dealing with this Bill. He has a point. When Deputy Richie Ryan was Minister for the Public Service and Minister for Finance, in February 1976 he proposed the transference of Fóir Teoranta to the Minister for Industry and Commerce. I agreed with him, but because of the general election it did not happen. I am not suggesting it will happen in the immediare future; there has been no such Government decision in relation to this State body. At that time quite a number of bodies were shifted to various Ministers. For example, the Sugar Company went from Finance to Agriculture and Fisheries. The National Stud was shifted and other bodies we investigated on the joint committee. It is logical enough. I agree with his suggestion and I will bring it to the notice of the Minister. The second last Government proposed that development.

Senator Conway said the management services unit of Fóir Teoranta should be expanded. While this is directly a matter for the board, I can tell the Senator that I would be very much in agreement with the board if they decided to extend this unit. At present they are recruiting a number of key executives with industrial experience for this unit. That development is welcome and I am sure the Senator will be glad to take note of it. The Senator also called for greater liaison at local level with the companies concerned. I will bring this matter to the attention of the Minister for Industry and Energy. His Department should be co-ordinating and directing that approach.

Senator Bruton was concerned about a delay in bringing in this legislation which, he suggested, may have obstructed Fóir Teoranta's efforts. I can assure him that there was no delay. I was a bit worried about that aspect prior to Christmas so we arranged that it would be taken on the first sitting day after Christmas. There is no problem about Fóir Teoranta at the moment. There is still £3 million left unissued under the present legislation and Fóir Teoranta have not felt inhibited in any way. In any event they will have the new funds available now. They were not in any way under strain with regard to their liquid resources prior to the enactment of this Bill.

Senator Lanigan raised a question about agriculture and the service sector. I have already dealt with that point. He raised the question of the possible economic justification for assisting projects which might ultimately undermine existing viable projects. I can assure him that Fóir Teoranta are extremely careful in this area. It is a very delicate area. There are very competent and experienced individuals on the board of Fóir Teoranta and at management level as well. I am sure all Members of the House will agree with that and in particular Senator O'Brien, Senator Hillery and others who met members of the board and senior executives of the board at meetings of the joint committee. It is fair to say that they themselves have a large number of business contacts in their own right. In addition, the Fóir Teoranta management are in a position, through their contacts with the IDA, to bring to the attention of the board any possible dangers that might exist on this front. Therefore I can assure Senator Lanigan that the possibility of projects being assisted by Fóir Teoranta undermining existing viable projects certainly will not arise.

The final point I would make — Senator Bruton raised it — is the question of foreign companies availing of Fóir Teoranta funds. This has been mentioned and is very closely monitored by Fóir Teoranta. I can assure my colleagues here that no funds are released by Fóir Teoranta unless they are absolutely guaranteed and it is certain that the funds will be used locally. In many instances Fóir Teoranta insist that parent companies not only leave these funds within the Irish subsidiaries but actually commit substantial additional funds themselves directly to the venture before Fóir Teoranta make their contribution. Usually Fóir Teoranta make their terms quite conditional on such commitments. Therefore there is no real problem in that area.

I thank Senators for their assistance on the Second Stage of this Bill. There is no doubt that we face a critical employment situation at present. In view of the benefits of Fóir Teoranta in ameliorating the worst effects of the close on 18,000 redundancies last year, and of the 15,000 redundancies the year before, with a gross loss in overall employment of close on 60,000 in what could only be described as a crisis employment situation I would submit that the additional money we are giving to Fóir Teoranta is money well spent, utterly desirable and will be used in the best interests of the companies and the workers concerned in those companies.

Question put and agreed to.