The main purpose of this Bill is to enable the Industrial Credit Company — the ICC — in this its jubilee year, to continue its operations. The ICC was established in 1933 mainly to provide long-term industrial credit. During the ensuing 50 years, the company, both directly and through its subsidiary company ICC Corporate Finance Limited, has provided an ever-expanding range of services, including loans, venture capital, hire purchase and leasing facilities, financial capital underwriting, issuing house services, advice on mergers and management buy-outs and general financial advice. As a result the ICC has made and is continuing to make an important contribution to the development of industry in Ireland.
The company's present respected position in financial and industrial circles reflects great credit on its board, management and staff over the years. I might add also that the ICC has shown a profit in every year since its establishment and has paid the Exchequer dividends in most years, including every year since 1969. I should also like to think that the practical support and encouragement which all sides of each House have given to the ICC since its establishment has made no small contribution to its success.
Since the enactment of the last Industrial Credit Act in 1979, the ICC has increased its level of annual advances from £66 million in 1979 to £140 million in 1982, mainly for the benefit of smaller enterprises as is shown by the fact that last year, over 90 per cent of all transactions approved by ICC were accounted for by firms employing less than 100 persons. The single most significant contributory factor to this increased activity has been the extension of exchange risk guarantee schemes which are concentrated on small and medium-sized enterprises. As a result the ICC now administers European Investment Bank schemes for fixed-asset investment in both the manufacturing and tourism sectors. There are also working capital schemes, financed by direct foreign borrowings by the ICC, for manufacturers, exporters and tourism enterprises.
The exchange risk for all of these foreign borrowings by the ICC — which stood at £229 million at end-October 1982 — is borne by the Exchequer. This is not a costless commitment as the recent EMS currency realignment has underscored. At a time when there is an urgent need to control public expenditure, the Government must be sensitive to the actual and potential burden on the Exchequer arising from the provision of exchange risk cover on this scale. It is appropriate, therefore, that the cost-effectiveness, as an industrial incentive, of these schemes should be reviewed from time to time. However, I am fully aware of the value to the productive sectors of low-interest rate loan finance during the present recession. This value is clearly shown by the fact that in 1982, the ICC increased its total advances by almost 40 per cent despite the difficulties experienced by industry.
I now move on to the detailed provisions of this Bill which are as follows. Firstly, to raise the ceiling on the maximum amount which the ICC may borrow; secondly, to raise the limit on the maximum amount of ICC borrowings which may be guaranteed by the Minister for Finance; thirdly, to give the Minister for Finance power to waive the repayment by the ICC at certain Exchequer advances in respect of schemes operated by the ICC at the credit risk of the Exchequer and fourthly, to increase from seven to nine the maximum number of directors on the ICC board primarily in order to allow direct State representation on the board.
There has always been a statutory limit on the extent to which the ICC may borrow for its operations and this limit has been amended from time to time, as required, by legislation. It now stands at £400 million which was fixed in 1979. At the end of its last financial year on 31 October 1982, the company's borrowings were £364 million. Thus, the ICC will be reaching its borrowing limit shortly and an increase in this limit is now required to enable the company to continue its operations. The new limit proposed in section 2 of this Bill is £800 million. This doubling of the existing limit is intended to meet ICC's anticipated requirements over the next three to four years, in accordance with established practice for legislation of this type. Accordingly, I trust that Senators will agree that this apparently large increase is not unreasonable.
Also, in accordance with the now usual practice for ICC legislation, it is proposed, in section 3, similarly to increase the limit on the amount of the ICC's borrowings which the Minister for Finance may guarantee. Except for advances from the Exchequer virtually all of the ICC's borrowings, whether by way of taking deposits or otherwise, must be guaranteed. As the Exchequer has not made any advances to the company since 1980 because of the ICC's increasing institutional strength, Exchequer funds have become a sharply declining share of the ICC's sources of funds. Accordingly, there is now more than ever a need to raise the guarantee limit in line with the borrowing limit.
Section 4 proposes to give the Minister for Finance power to waive repayments of principal due from the ICC on Exchequer advances. While this is a general provision, it will only apply to certain Exchequer advances which were on-lent by the ICC at the credit risk of the Exchequer under certain schemes either to help small and medium-sized under-capitalised industrial companies or for shipbuilding purposes. The special loans scheme for under-capitalised enterprises was introduced in the late sixties. As the loans under this scheme were intended to be specifically above and beyond those warranted by normal banking criteria in order to help the enterprises involved to start up or expand, the risk of defaults was correspondingly higher. Some of the companies concerned have unfortunately been unable to meet their commitments to the ICC. Advances for shipbuilding were provided to the ICC for their subsidiary Shipping Finance Corporation for on-lending also at the credit risk of the Exchequer. The Minister for Finance already has authority to waive repayments of interest on Exchequer advances but he has no such power in relation to repayment of principal. Hence the need to make provision for this in the present Bill. Section 4 also provides that amounts so waived will be repaid to the Minister for the benefit of the Exchequer from funds to be provided by the Oireachtas.
In order to avoid any possible misunderstanding of this general provision, I would like to emphasise that there is absolutely no question of the Exchequer — either now or in the future — having to waive any of the repayments of advances due from the ICC on its normal commercial activities.
The final substantive section in the Bill — section 5 — proposes an increase from seven to nine in the maximum number of directors on the board of the ICC. The primary purpose of this increase in numbers is to enable direct representation of the company's owner — that is, the State — on the board of directors. Recent experience in the State-sponsored body sector has pointed to the need for developing a closer understanding on broad policy issues between Government and the boards of State companies and the proposed increase in the size of the ICC board is designed to facilitate this process. I could, of course, have accommodated direct representation of the State within the existing board structure. However, as the ICC board is relatively small and as one of its members is the managing director, I consider that it would be preferable to increase the size of the board rather than reduce the number of experienced and well-qualified directors on the board whose contribution is so vital and is much appreciated in view of the many other calls on their time. I should make it absolutely clear that the proposed increase in the size of the board implies no criticism whatsoever of the existing board whose performance has been admirable and is reflected in the strong position of the company.
In summary, this legislation is intended to enable the ICC, in this their golden jubilee year, to continue their important activities. I know that Senators on all sides of the House will join with me in congratulating the present and past members of the board, management and staff of the ICC on 50 years of devoted service in the development of Irish industry.
Finally, I would like to pay special tribute to Mr. Seán MacEntee, happily still with us, who as Minister for Finance 50 years ago piloted the legislation establishing the ICC through the Oireachtas.
I commend the Bill to the House.