Seanad Éireann debate -
Wednesday, 15 Jun 1983

Vol. 101 No. 1

Irish Steel Limited (Amendment) Bill, 1983 [Certified Money Bill]: Second and Subsequent Stages.

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

Minister of State at the Department of Industry and Energy (Mr. E. Collins)

I must apologise to you, a Leas-Chathaoirligh, and the House, for being late in arriving. The reason was that the monitor did not show that the previous Bill was going on to Committee and Report Stages. Therefore I thought that Bill was still on Second Stage. I extend my apologies.

The purpose of the Bill is to increase the limit to which the Minister for Industry and Energy, with the consent of the Minister for Finance, may guarantee borrowings by Irish Steel Ltd. from £75 million to £100 million.

Irish Steel Ltd. are a wholly State-owned company with fully paid up shares amounting to £30 million held by the Minister for Finance. The principal activity of the company is the manufacture of steel from scrap. Their main products are reinforcing bars, merchant bars and sections in a range of sizes principally for the construction industry.

Irish Steel's new plant came into commercial production in July 1981 and has a rated capacity of 333,000 tonnes of finished product per year, which is more than double that of the old plant. This increase in capacity, at a time when over-capacity already existed in Europe, was necessary in order to achieve the economies of scale required for competitiveness.

The cost of the development project is only one of the costs incurred by Irish Steel. In addition, the company have incurred losses since 1974 due, firstly, to the obsolescence of the old plant, secondly, because it was necessary to suspend production during the installation of the major items of plant and, finally, since July 1981 in commissioning products, re-entering old markets and breaking into new export markets. The combined effects of the project cost and the losses have resulted in borrowings amounting to £75 million at the end of May 1983.

The company's accumulated losses at 30 June 1982 amounted to almost £23 million and their anticipated losses for the year to 30 June 1983 are of the order of £21 million. For the information of the House I should add that the company were in receipt of a grant in 1982 to the value of £25 million, which reduces their accumulated losses by that amount. Further losses are expected to be incurred in the following years, even if substantial additional equity, to which I will refer, is provided. It is not possible to be precise about the extent of future losses, which would depend on the achievements of the company in relation to sales, costs and prices.

The world steel market continues to be very depressed, with the European market in a particularly bad situation. Production of crude steel in the EEC fell by 12 per cent in 1982, while domestic demand for steel in the Community decreased by 6 per cent. Recent forecasts, which revise downwards earlier projections, indicate that world steel consumption in 1983 is now expected to be only 1 per cent above the 1982 level, while that for the Community is expected to fall by over 1 per cent. The level of over-capacity in steel production in the Community at present is estimated at 40 million tonnes per year and demand for steel is now at an even lower level than in 1982.

The excess of supply over demand, which pushed up costs and caused prices to drop below the break-even point in many companies, and the cut-throat competition on export markets have seriously eroded the financial viability of the European steel industry. As a result the European Commission has had to take a number of measures designed to prevent the situation deteriorating into a state of chaos and to set in place the mechanisms required to adapt the structure of the industry to the new situation. Among the measures currently being operated by the Commission are restrictions on investment in steel production, restrictions on State aid to steel producers, restrictions on steel production, measures to raise prices, aids for redundancy, short-time working and early retirement, loans to industries which can help to replace employment lost through steel plant closures and loans to help steel undertakings to carry out restructuring plans which involve a reduction in capacity.

The House will be aware that, in July 1982, the Minister for Industry and Energy and the European Commission jointly appointed consultants to assess the viability of Irish Steel. The consultants report which became available in September 1982 concluded that the company's production costs were not competitive due to the high price they pay for their energy supplies. However, on the bases of certain assumptions in relation to prices, reduction in production costs, growth in sales and revenue, and the provision of additional State funds of up to £89 million, the company could, in the consultants' opinion, be viable in the long-term and should be allowed to continue in operation. The consultants warned, nevertheless, that if it were decided to keep the company in operation and to provide the additional funds, there was the risk of failure due to the difficulty of adequately breaking into the export markets.

As far as energy costs are concerned, discussions are taking place between the company and their suppliers in a manner consistent with normal commercial practice in an effort to improve the company's position. In addition, I have recently taken action to have a review of the costs and prices of the ESB carried out, because of the major impact which the board's prices have on the economy in general. I should add that Irish Steel are the ESB's largest consumer of electricity.

I should stress that no financial aid, and that includes equity investment and the guaranteeing of borrowings, may be provided by a member state to a steel producer without the prior approval of the European Commission and aid for the continued operation of a steel undertaking may not be paid after 1984. I emphasise that the Government have not taken a decision in relation to aid to Irish Steel in respect of any period after 1983. Their decision, in due course, will be influenced by the viability prospects having regard to the company's performance up to the end of this year.

A notification of the maximum level of aid which the Government might contemplate was sent to the Commission in September 1982 to meet the deadline set by the Commission for the receipt of such notifications. The maximum aid envisaged in the notification was the guaranteeing of further borrowings of £25 million, to be replaced by share capital, and the provision of share capital of up to £89 million. The Commission is required to give a final decision on all aid notifications by 1 July 1983. The Commission will not approve aid unless the basic viability of companies is established.

The Commission approved a Government grant of £25 million to Irish Steel in 1982 and the investment, earlier this year, of a further £5 million in the share capital of the company. In addition, the Commission has approved the drawdown by the company of a further £7 million in guaranteed borrowings which will be sufficient to meet the company's requirements pending a final decision by the Commission on our aid notification.

Irish Steel have recently negotiated a loan facility for £3 million and will need a further £17 million in loans to enable them to operate up to early 1984. Their ability to obtain this finance is dependent on the enactment of legislation to enable the Minister for Industry and Energy to guarantee further loans.

At this point I would like to comment on the system of production quotas which the Commission operates for the purpose of matching supply with demand. The quotas for each company are based on their historical production, with some adjustment for companies which have brought new capacity on stream. The present quota system is due to expire on 30 June 1983. The Commission has made a proposal for the extension of the system for a further period of 2½ years and for the inclusion, for the first time, of plate and heavy sections in the mandatory quota system. The House will appreciate that Irish Steel's historical production was extremely low. The company need a higher capacity utilisation rate than that which would be available under the Commission's proposal if they are to have a viable future. In discussions on this proposal our aim has been, and will be, to ensure that Irish Steel, which carried out their restructuring plan with Commission approval, should not be made unviable by the application of the quota system. I am hopeful that a satisfactory arrangement can be worked out which will take account of Irish Steel's position.

Irish Steel now have a very modern and versatile plant whose production efficiency compares favourably with the best in western Europe. The company have made considerable progress in the past year with the result that their volume of sales, in the year to 30 June 1983, is expected to be more than double that achieved in the previous year. This aspect of the company's performance is encouraging but much more has still to be accomplished in relation to costs, prices and further increases in sales if the company are to succeed as a viable and competitive producer.

The difficulties facing Irish Steel are considerable and it would be misleading of me to understate them. The company must achieve an increasing level of sales at a time when the international steel market is anything but encouraging and at a time when established producers are being forced to reduce their production capacity because of the imbalance between supply and demand. It is clear that the future of Irish Steel will depend on the way in which the markets for their products develop and on the costs and efficiency of the company's operations.

To conclude, I would hope that, in spite of the many difficulties now facing Irish Steel, the essential performance required to safeguard the future of the company can be achieved.

I am confident that the Bill will commend itself to the Seanad and I recommend the Bill for its approval.

Mr. Smith

I welcome this Bill which increases the limit on borrowings by Irish Steel from £75 million to £100 million. It is, perhaps, a holding operation in this company's business coming as it does in the wake of the number of closures there have been in the Cork region and the tottering situation obtaining with regard to a number of other industries — Verolme, Dunlop and NET, to mention but a few. The Cork position with regard to unemployment is by any stretch of the imagination very serious. While we have an overall unemployment problem it is quite clear that, as far as the Cork region is concerned, it is very acute. Therefore we welcome this provision in that it at least holds out some hope for Irish Steel who are obviously in quite a difficult situation.

The Minister referred to the fact that he was anxious to see sales improved and productivity enhanced but all of this, unless the world climate with regard to prices for steel improves, may not be sufficient to guarantee the viability of this company. Already the capacity of the company to make repayments on existing borrowings is in question. I wish to ask the Minister to indicate in the course of his reply to the House the prospects of the company in this regard. Also, I would like to ask him to give a summary of the overrun on the cost of the development of the new plant which, as he indicated, is very versatile and one of the most modern in Europe. I do not want to condemn the company in this regard because there have been many other situations as far as State organisations are concerned where we have had very substantial overrun on anticipated capital investment. In this case it is approaching nearly double the estimate for the provision of this plant.

In an effort to try to cut back on borrowing for current expenditure and overall expenditure, to try to get some semblance of viability into what we do in relation to State organisations and to give the public a better return on investments, we would like to hear why it is that estimates given on the basis of all available information at the time should end up so low in comparison to the total expenditure at the end of the day. Many private companies — and one must regard the State in the long run as a private company in the sense that at some stage it must be in a position to pay its way — could not tolerate this level. I am reluctant to call it waste but it seems to me having regard to the overall capacity of the company that it leaves a lot to be desired. Any reforms that we can suggest here in relattion to the organisation of Irish Steel and other State bodies in terms of expenditure of this kind should be made. This aspect needs to be monitored in a much more detailed and comprehensive way to ensure that we do not have this overrun.

This plant produces only about 0.2 per cent of the European requirement in the steel area. From the point of view of the versatility of the plant, the employment that it provides in Cork and its importance to the economy as a whole, it is necessary that we ensure that it gets every possible opportunity to develop management, marketing, sales and all the possibilities that would make it viable in the next few years. As far as this side of the House is concerned, we are prepared to support the Minister in his efforts in this regard. We look forward with some anticipation to developments in the next few months, and particularly in the next couple of years, to the longer-term viability of Irish Steel.

Mr. O'Leary

In introducing the Bill, the Minister of State has set out the problems faced by the steel industry on a worldwide basis and in a European context and has placed Irish Steel in proper perspective in this regard. This Bill has the enthusiastic support of the Fine Gael Party and we are very pleased that the Minister of State is here to move the Bill. It is a particular privilege for me to speak on this Bill, coming as I do from the Cork region and anxious as I am to ensure that the industrial infrastructural development of the Cork region would continue to make the significant progress over the next few years that it has made in the past ten to 12 years under all administrations. Irish Steel are a very significant kingpin in that industrial infrastructure and I recommend to the Minister that every effort be made to ensure that Irish Steel not only continue at their present level of capacity but to the limit of that capacity. I suppose it is a bit unrealistic to talk about increased capacity in the present climate.

Irish Steel are a substantial employer of skilled and semi-skilled male labour in the Cork area and it is important that this should be maintained. We share the Minister's view that there is no way in which Irish Steel can be given a blank cheque for the future but I am quite sure that the investments being made are properly managed. If the proper response is available from the work force and if proper management is there — and there is no evidence to suggest that it is not — then we should have a prosperous steel industry in the Cork region for the benefit of the country as a whole. This is a good example of State enterprise over the years. Those who established the State and those who followed closely on them, even though by and large they were themselves conservative in philosophy were not afraid for ideological reasons of the implications of State enterprise. We should put that on record and express our support for that general viewpoint.

State enterprise is as good as the particular project under consideration. In the case of Irish Steel and many of the other enterprises, it has been very good for this country and for the region in which it is my privilege to live. No ideological hang-up should get in the way of support for an industry of this kind. The steel manufacturing industry is State-owned or State-aided to such an extent that it is impossible to imagine what that industry would be on a worldwide basis if it did not have the support and encouragement, if not the open encouragement certainly the covert support and encouragement, of Governments, even Governments as disinclined to involve themselves in the economic process as the United States of America. Such Governments support the steel industry in one way or another. They may do it through defence projects and other methods but they support their steel industry. This kind of very heavy industrial enterprise deserves our support. However, no support is open-ended and it is important to recognise this. If any industry, and I am not suggesting that Irish Steel come into this category, goes too far and the expense of running it is too much, obviously it must be questioned to ensure that on balance it is making a proper contribution to the industrial life of the country.

One of the most important points raised here was raised by Senator Smith. The Minister should be encouraged to give to the House an indication of the cost overrun which was involved in the installation of new equipment in Irish Steel. If that cost overrun is substantial, as I suspect it is, I think the Minister should be further encouraged to indicate to us who was responsible for that cost overrun. There is no point in saying just because the cost overrun was substantial that we should automatically blame the management, the workers or any other group. It might have been the Government's fault, it might have been totally the fault of people outside this country altogether. It might have been outside our control completely. With regard to other matters which come before us here I said the acceptance by those who are involved in State enterprises of the responsibility for their actions is a cornerstone in the expansion of that section. Those of us who do not have an ideological hang-up on the question of increased State enterprise can only support that if the existing industries are seen to live up to their responsibilities and to accept the consequences of their actions.

This should not automatically be seen as an indictment of any of the workers in that industry. Very often, particularly with regard to capital projects, the responsibility could not possibly lie with the workers. The responsibility very often either lies in circumstances totally outside the control of the company or on the management and board of directors of the particular State company. I am very anxious that the Minister would share with us his assessment of who bears the responsibility for any cost overrun, if such a cost overrun existed, and in what way that particular group are being held responsible for their actions. I will have to wait until the Minister replies but if it was the responsibility of management they should be held to be responsible and logical consequences should follow as a result of that situation. If it was the board of directors, they should accept the responsibility and logical consequences should follow from that situation.

The future viability of projects like Irish Steel has been in the past and is now seriously jeopardised by reason of investment decisions which were far too expensive to implement compared to the original projection. It is not reasonable that in the future management, workers or the State in general should accept without question and without satisfactory explanation the results of unwise investment decisions or investment decisions which were not properly implemented.

The Minister has also emphasised and touched upon one very important aspect of Irish Steel's future, and that is the question of energy costs. There is no aspect of Irish industrial life which is more important at present than energy costs. We had a discussion recently on the question of wood processing and in that discussion it emerged that the energy cost involved in this was a vital factor in the reduced employment in the company in question over years past.

We see in the case of Irish Steel that the whole question of energy costs, and ESB costs in particular, are a vital ingredient in the future prosperity of this company and because they are so vital for this company they are a vital ingredient in the industrial prosperity of the country as a whole. For those whose responsibility it is to control the organisations that determine the levels of these costs it is important that they would be made aware of their responsibilities not only with regard to their own individual enterprises but their responsibilities for the future prosperity of companies like Irish Steel where a substantial portion of their costs are outside their own control. If I take from the Minister's introductory speech a view that he considers the problems of Irish Steel to be part of an overall problem with regard to the question of competitiveness, and specifically an important ingredient in that element of competitiveness is the cost of our energy costs, he is on the right lines and should continue to pursue to their logical conclusion efforts to reduce energy costs for this and for other companies.

The Bill in so far as it seeks to extend the power to guarantee to £100 million instead of £75 million the guarantees which the Minister may give in respect of Irish Steel is welcome. We look forward on this side of the House to the maintenance of substantial beneficial employment in Irish Steel in the Cork area. This is the long-term interests not only of the Cork area but of the country as a whole. For that reason this Bill has our enthusiastic support.

Mr. Conway

I wish to welcome the Bill as it extends the guaranteed borrowings of Irish Steel Limited from £75 million to £100 million. It is, as Senator Smith said, a holding operation but Irish Steel in their performance to date have been quite an unfortunate company. From 1978 to 1982 — and we have just been given the figures for 1983 — the figures indicate that sales have held at £13 million. We have been told by the Minister that sales have doubled to June 1983. In 1978 the company lost £1.6 million and continued throughout the period from 1978 to 1982 with losses of £1.6 million, £2.9 million, £6.6 million, £12.9 million and £21.7 million last year. If we look at the interest rates and the interest charged on the accounts, we find that from 1978 to 1980 the interest rates were in the region of £580,000 to £700,000. The interest rate for 1982 was about £11 million which shows that part of the reason for the loss is due to the massive interest rate. The Government gave a grant in 1982 of £25 million. I look back at the employment situation in Irish Steel and find that in 1979 there were 770 workers in Irish Steel and in 1980 there were 630. That has remained static ever since.

The company, through a massive asset reorganisation has placed itself as the Minister said, in the forefront of steel production in Europe. It is catering at present for 70 per cent of sales on the export market and 30 per cent of sales on the home market. As the Minister said in his statement, over-production in Europe is 40 million tonnes in excess production per year. This has the effect of lowering the prices and giving the company a very hard run as far as the export market is concerned. The Minister should reduce the cost of gas and power to the company. I understand the charges to Irish Steel have been higher than the charges to other commercial companies. If the price of gas is reduced that will reduce the profits of Bord Gáis and it will give Irish Steel a better chance to recover. Unfortunately the problem is not due to charges for power; it is because of the over-production in the European market and the small prices the company get for their exports.

Irish Steel have been unfortunate. When the company were nationalised they were left with very old plant and, therefore, their production costs were massive. Once they were equipped with modern plant, as far as steel was concerned, they found they were cut off because of the over-supply in Europe. It was unfortunate that Governments did not see fit to look at Irish Steel before and inject the kind of capital needed in the late sixties and early seventies to take advantage of the economic situation in Europe at that time.

Irish Steel need to be restructured financially. With interest rate charges at £11 million it is not possible to examine the affairs of the company in any great detail. The profits are exaggerated because of the capital programme. The purpose of the Bill is to raise borrowing from £75 million to £100 million, giving guarantees from the Government. A total amount of £125 million has been provided for Irish Steel, of which £75 million has been by way of guaranteed borrowings. I would have liked to have been in a position to examine the consultants' report in greater detail and not to read it from the Minister's speech. That report would seem to indicate that a reduction in production costs was the first step and, secondly, growth in sales. A growth in sales is not enough: they must be at a proper price. The report said there would have to be a proper financial package for the company amounting to £89 million to make them viable. We are involved in a holding operation today.

As Senator O'Leary and Senator Smith said, we cannot act in isolation. It is a strategic operation. The repercussions of the company's closure on the whole Cork area would be enormous. The region was once the heartland of the textile industry in the country but that is now gone. Irish Steel have one of the most up-to-date and efficient production units in Europe. If the recession declines they have a chance to take advantage of that. We cannot turn away the great tradition that there is in Cork. We have spent many years training people in that company to work in a modernised and efficient plant. Not only the 630 jobs directly involved in Irish Steel but about 300 ancillary jobs are involved. I urge the Minister to look at the selling techniques and to improve and strengthen the marketing side. We are all here today speaking about the production side. We agree that is first-class, but there is the other side of the coin, namely, the marketing side. We must be able to explore markets in which we can get better prices.

I congratulate the Minister of State and the Minister for Industry and Energy on their meeting with semi-State bodies. That was an unique occurrence. I agree with the Minister's philosophy about setting up the bodies on a more commercial basis and drawing up plans in respect of their activities for the next five years. The Minister should have available to him at all times information on sales performance, capital expenditure, manning and the amount of jobs involved in each of the semi-State companies. He should have this information on a monthly basis. There seems to be some contradiction between what the Minister is now saying about sales to 30 June this year and what was actually said before. Because it is such a massive operation the figures should be presented on a monthly basis. In all companies in the commercial field they have monthly accounts and I do not see why the Minister should not have very simple monthly accounts.

I welcome the monitoring of State bodies by the Government. I should like to suggest that the Minister would have a consultancy unit in the Department of Industry and Energy which would be directly responsible to him and would be manned by a management consultant, an economist and management accountants, to examine the performance of companies like Irish Steel and other companies. They would report directly to the Minister and they would be involved with the civil service and with the companies themselves. This would be a step forward in the Minister's control of the semi-State bodies. There is such a consultancy unit in the National Prices Commission and it did good work as far as the control of companies was concerned.

I congratulate the Minister on setting down guidelines for the planning and control of public expenditure to ensure that future projects are professionally assessed. I welcome his fresh approach and that of the Minister of State in this matter and I wish them well in their deliberations. I welcome the Bill.

Mr. Cregan

I wish to welcome the Bill. As a representative of the Cork area I am concerned about the lower harbour area generally and in particular Irish Steel. I appreciate what the Minister has said. It is unfortunate that the public are unaware that one of the major problems of Irish Steel is energy costs. The ESB's biggest consumer is Irish Steel but I think people are not aware of that. The greater proportion of energy that we produce today is being used, costing 20 per cent more than to anybody else it certainly must put Irish Steel costs out of all proportion.

The rationalisation that has gone on in Irish Steel over the years is very encouraging. No objections have been made by people within the trade union movement to rationalisation; indeed, they are very attentive to bringing about rationalisation. It is unfortunate that this area is seen to be one of the lame ducks of semi-State bodies. I am conscious, like Senator Conway, that questions must be asked as to whether Irish Steel themselves are doing enough as regards marketing their products. We are in a bad recession now and the Minister in his statement said that steel sales are down. I appreciate that, but in view of the amount of money that has gone into rationalising and improving the plant — it is one of the most updated plants in Europe today — I cannot understand why more emphasis is not being put by the company on trying to sell their product. Questions should be asked about that. We should never give the impression that semi-State bodies should be allowed to do what they want when they want to do it. I, like Senator Conway and others, am encouraged by the meeting of semi-State bodies with both Ministers over last weekend. I do not want to give any impression that Irish Steel is under serious question from central Government, although questions must be asked, but I am confident that given the right time and the right market situation they will compete.

However, nobody should be allowed to bring about a situation in which they are not allowed to compete because of costs, and here I refer to the ESB. It has been said that 20 per cent of Irish Steel costs per year are accounted for by energy and Bord Gáis. I do not think Bord Gáis costs them a great amount or that they are one of the highest paying customers of Bord Gáis, but I would like to be corrected there if I am wrong. With the amount of energy that we are producing and the number of people employed by the ESB — who have increased their staff over the years yet their costs are higher than anywhere else in Western Europe — consideration could be given to supplying power to Irish Steel even at a loss. That would be better than allowing power to drift into the air. We put so much money into our Department of Industry and Energy and the ESB and they are making no move between them to assist each other. That is very serious. The people are paying for this. When the people are asked to pay more then more consideration should be given to it.

Finally, I do not want the impression to go out that Irish Steel do not want to get on with their work. The opposite is the truth. It is unfortunate that people within both Houses should not be seen to be investigating and touring these areas to see how they are working. It would open anybody's eyes to see the plant now working in Irish Steel and indications for the future are only for the better. I appreciate what the Minister is saying, and I am confident that in the future, given normal times, Irish Steel will prove beneficial for us all.

Mr. B. Ryan

I do not want to talk too much from a position of local interest though obviously I have a considerable local interest in the existence of Irish Steel. Irish Steel is a case in point and the other semi-State company whose activities are referred to in the Minister's speech is another case in point, where we seem to be pursuing the national objective of blaming absolutely everybody and everything except those who are ultimately responsible for investment decisions, the board of directors of a company who are answerable to the shareholders who are the State in both cases.

Irish Steel were set up for very important strategic reasons during the Second World War. They pursued a downward course from then on, perhaps inevitably because of the introduction of free trade. We seem to issue warnings to all and sundry that Irish Steel cannot be continued indefinitely. It is important to remember yet again who will be the victims if Irish Steel close down. It will not be the State who are the shareholders because the State will simply avoid a loss-making enterprise; it will not be the senior management because their friends in the Irish private sector — who prefer to see companies like Irish Steel close down in the first case and who make a major campaign item of that — will obviously look after the senior management in terms of jobs within the private sector. We can have no doubts about that. It will be the ordinary work force of Irish Steel who will suffer, yet they are the ones who have the least control or impact over the sort of decisions that are necessary in the case of Irish Steel.

You can get yourself involved, as unfortunately the Minister appears to have done, in self-fulfilling prophecies and in trying to extend important comparisons into areas where they do not necessarily apply. We have, for instance, a considerable emphasis in this country on our decline in cost competitiveness and the Minister comes up with the extraordinary statement, to which I can see some point but it is far too bald, that excessive supply over demand pushed up costs and caused prices to drop below the break-even point. If he is talking about the fact that in a major capital-intensive industry you reduce production therefore the cost per unit of production will go up, perhaps we have a point, but I suspect that that was the sort of thing that was slipped in because everywhere in this country it is apparently almost ideologically necessary to point out yet again that we have a problem about our cost competitiveness. I wish this sort of thing would not be thrown around too readily.

A central problem in the question of Irish Steel's viability is the cost of energy being supplied to them. One must judge the ESB by proper commercial criteria. A major State enterprise which generates electricity ought to be able to do it realistically and profitably. What is very necessary to realise in the ESB — and the business people in this House even more than myself ought to understand this — is that the ESB have had to undertake a massive expansion in a very short period because of the relatively short period of our industrial development. We are in the process of real industrial development for only about 20 years and, therefore, the huge capital investment in extra generating equipment had to be done in a short period of time. It must, presumably, increase the capital charges and therefore it must increase unit costs as an inevitable consequence of the massive investment that the ESB had to do to plan and to meet the increased electricity demand resulting from the development of this country. Other countries who had a reasonably slow but more long-term development of industrial production will not have these problems. The CEGB in Britain, for instance, will be developing electricity capacity over 40 or 50 years and, therefore, their capital provisions will be more evenly distributed and will not become a charge on one era in society which is one of the problems with the ESB. Another problem with them is the extraordinarily high interest rates which is not their fault and yet another is the problem with our currency which is not their fault. They are not responsible for currency charges. A fourth problem with the ESB is the cost of energy in this country.

Speaking as somebody somewhat qualified to speak in this area, I remind people again that the real cost of oil is far more dependent on the cost of transporting it than on the cost at the well-head. Since transport costs internationally into this country are recognised to be very high, it is inevitable that the cost of oil to any public corporation like the ESB will be enormously high. Therefore, that cannot be laid at the ESB's door. The final criticism that is used against the ESB is the implication that they are over-manned. Anybody who has a confidential discussion with executives in the ESB will know that the reason they are overmanned is that politicians from all sides of this House and the other House spend their time pressuring them to take on people——

Mr. Smith

Nonsense.

Mr. B. Ryan

——and pressuring them to open up uneconomic generating stations to meet various political needs in various parts of the country. That is the experience of the ESB for the last 20 years and it is a pity that it is only I who can stand up and say it. I know that. I remember discussing it ten years ago with an executive of the ESB and he spoke about the way they would develop and he said everything would be grand unless there was a by-election in a critical area in which case they would have to build another power station.

There is no point now, when costs become impossible and difficult and demanding, in suddenly turning around, washing your hands and saying that it is all the board's fault. The ESB have an international reputation in the area of electricity generation. They are regarded as a major competitor consultancy-wise internationally. That is not the record internationally of a poor organisation. If we are to have implications and aspersions cast towards the ESB in the Minister's speech they are entitled to be defended and that is what I have just done. The ESB are an efficient, competitive organisation, competitive internationally and competitive nationally, and they deserve better than the sort of abuse they have got.

With regard to Irish Steel, I do not know if they have a long-term or short-term future. What I know is the way we are wont to lecture shareholders and directors in private companies about their responsibilities to their employees. All of us in this House have a capacity to point out the irresponsibility of shareholders in certain companies and of boards of directors of limited companies. Just as private individuals have those responsibilities the State as the major shareholder in Irish Steel has an obligation to the employees of that company also. Therefore, irrespective of the long-term or short-term future of Irish Steel — I cannot judge the long-term commercial viability of a corporation like that — the State as the major shareholder has a responsibility to its employees which cannot be fobbed off by talking about it being an autonomous semi-State corporation. The State is the shareholder; the State is, therefore, ultimately responsible for the welfare of the labour force and cannot suddenly discover a way of backing off that responsibility. The State set that up to meet a national emergency and it cannot now walk off from it and say it is somebody else's problem.

Mr. Kirwan

I suppose it can be argued that in a storm any port constitutes a haven and any Bill that comes before this House which provides in some shape or form the wherewithal to continue the operations of the major industrial element in a viable way is to be applauded and recommended. However, I do not want the Minister to think that he has reached Nirvana. All I have heard so far are compliments being thrown in his direction. I want to break the mould a little and say that this measure does not go far enough. If one reads the Minister's speech one cannot help but conclude that a substantial portion of the difficulty in the financial sense being experienced by Irish Steel was the decision to renew the plant. That decision was taken in the cold, hard light of day and against the background of over-production in the steel market throughout the world. The Minister said that it was necessary in order to achieve economies of the scale required for competitiveness. For gobbledegook that beats even what I hear in the trade union movement from time to time. What he really meant and what I want to make clear is that when we were dealing with the only steel plant that we have, any attempt to reduce its effectiveness by reducing its labour force — that is what we are talking about here — raises the whole question of the concept of import substitution.

We have been hearing now for months, indeed for years, that the only oil refinery we have should be closed down. People have been talking about dispensing with the only cross-channel shipping operation that we have both in Dublin and in Cork. We may well end up as a small nation, an offshore island off an offshore island off the mainland, depending on everybody's product in order to survive. There the dream of the late Seán Lemass suddenly vaporises and disappears because there is no doubt that social economic factors are involved when the State is an employer. I do not want to go into the field of repetition, and many Senators have already commented on this, but the reason for establishing the edifice of State and semi-State industrial enterprise related to an inherent desire on the part of the administrations of those days to at least be our own masters and not to be subservient to people who have no contact with us, no regard for us and certainly no regard for our welfare or our future. There is nothing wrong with the ideological concept of the State maintaining an interest in its manufacturing, industrial or trading infrastructure. We have a fairly proud record in this small nation in that in proportion to the population we serve we probably have more socialised industries than any country on this side of the Iron Curtain. That appears to be under general attack now and the popular thing seems to be to revert to the Victorian ethic of Lord Salisbury who said that governments have no responsibility for the provision of employment. This worries me when I see Irish Steel being the microcosm of this developing concept.

The labour force in Irish Steel made a very substantial contribution to the attempt to make the plant viable through the rationalisation procedures already described very succinctly by Senator Cregan. They did so in recognition of the fact that the difficulties of the steel industry were clearly apparent and there was a genuine desire on the part of the people employed in the enterprise to maintain that enterprise as a living, viable entity in order to provide them with continuing employment.

I said earlier that we welcome the Bill in the sense that it provides additional money to enable Irish Steel to balance themselves precariously on the razor edge of viability. That is not the happiest situation to put any enterprise in. Somebody must say to them that we have sufficient faith in them and in the labour force to salvage the only steel plant in operation that we have and to try to ensure that at least we can meet our own requirements from time to time without going abroad. Let us hope that the recent meeting with the semi-State companies by the appropriate Minister is in some way a recognition of the difficulties that face these bodies. I sincerely hope that there is a recognition here too of the socio-economic factors involved and that there is a crying need to strain every sinew and exercise every endeavour to maintain an element of employment consistent with human dignity. We recently witnessed an altercation on the northeast coast when some potatoes came in from the Low Countries. When I read it I was staggered. One cannot describe the potato as having been invented, but at least we have the distinction of having the first potato being planted somewhere near the Irish Steel foundry, not too far from it anyway.

If we have reached a stage where we are now eating potatoes originally derived from Aran Banners and exported some 50 years ago to places like Malta, Italy and Cyprus, let us hope that we can continue to maintain our building construction industry with steel produced within our native shores.

Mr. Magner

I would like to commend the Bill. I do not think there are any political points to be made in supporting this Bill because Fianna Fáil, Fine Gael and the Labour Party would not wish to see any damage inflicted upon Irish Steel. It is important from the public's point of view to understand that Irish Steel are usually discussed in the context of lame ducks. They possibly were a lame duck but the lameness has been cured substantially and we now have an extremely modern plant. As Senator Kirwan said a minute ago, they have a work force which in recent years has commended itself for its flexibility in trying to meet the management's dictates vis-a-vis manning levels, production levels etc. I think a magnificent job was done on that.

It is quite common to knock trade unions and trade unionists at times, but sometimes they do something at great sacrifice to themselves. They have shed a number of bodies and it is not in anybody's long-term interest to continue to decrease employment in such industry, but they have made those sacrifices. As Senator Kirwan said, they have accepted completely new manning and shift procedures. We now have a very modern steel-making plant with a capacity of something like a half million tonnes of steel a year.

It is the setting of the Bill in the European context that disturbs me so much because with all my connections and visits to Europe, I do not see too much of the Common Market or the common spirit but I see the French, Germans and British being extremely nationalistic in their approach. At all of the discussions around the table with our flags behind us and the European symbols and all the rest of it, they are in there defending absolutely their own national interests. It does not matter a damn whether Ireland, which was referred to as the offshore island off an offshore island, gets its fair share. It is ludicrous, to say the least, that the Commission sets the output for steel based on the historical production of European steel mills and having assisted us to make massive investments in Irish steel and to increase production then says, "Now that you have increased it, we will ensure that your quota remains at the stage it was when your plant was antiquated and when the production methods belonged to the early part of the century rather than the start of the eighties."

In the European context we must adopt a methodology more akin to the French than to the Irish approach to the Common Market. The French have devious means and methods of securing France's interest on almost every occasion. Think of the beautiful situation of the import of videos into France. They made it almost impossible because they built the clearing station in one of the most inaccessible regions of the country and every single video had to be checked by an official and stamped. The Japanese gave up sending them in because their trucks were tied up for weeks trying to get out from under French bureaucracy. In this country we are concerned about building good roads from the ferry, and that is not for exports: it is to expedite in large measure imports into the country that we become hyper-efficient. We must adopt some of the French tactics because we are fighting for our lives here.

I note in the context of the British steel industry that Mr. McGregor, is talking about building new steel-making capacity in Britain to tie up with the Americans to control the European steel market. We have a long way to go in terms of protecting our interests in Europe. I have no doubt whatever that the nationalism abroad in Europe is very strong indeed. National interest comes first, last and always. Ireland will have to fight extremely hard for fair play. Allowing us to modernise a plant which can give us extra production and then ensuring that under the rules and regulations there is no possible way we can sell that production seems to be a classic case of Catch 22. We must highlight that as often as we possibly can.

In respect of Irish Steel's marketing operation, I had a discussion some time ago with a person who is engaged in an Irish semi-State company and whose work takes him abroad almost continuously. He made a point which should be seriously looked at because we need the best possible people to go abroad and sell our products and we need to give the best possible financial back-up. The gentleman to whom I was speaking made the remark that after you have been to Nigeria once or twice, you do not really want to go back there any more because as soon as you finish talking to your potential buyer you are sitting in a hotel room; you do not have any friends; you do not understand what is on television because of the different language and so on. Basically, he was saying that the glamour of foreign travel quickly fades away and that the financial inducements were not great.

If we want people to go out there and sell Irish products — I am talking particularly about the State companies — we should adopt a more commercial dynamic in our approach to sales. We must look at our people abroad trying to push Irish products and ask ourselves if we are rewarding them sufficiently for the sort of work they do. I took the point when he said that if you are out of your own home and out of your country for something like eight or nine months a year it is quite a strain, not just on a person himself but on marriage. If we could direct more incentives to that area, we might get better results. After all, it is our first ringers we want out there selling and not the second best people. I am sure the competition, be it Americans, Japanese, French or whatever have absolutely their best people out there trying to sell their products.

Finally, there was, as Senator Brendan Ryan said, a strategic objective behind the initial foundation of Irish Steel. I believe that strategic objective still remains. If in coming years we concentrate on building and modern infrastructure we will need steel and steel-making capacity to do that sort of work. Otherwise, we will be talking about massive imports.

I welcome the provision in the Bill for increasing the borrowing limits of the company. Proper recognition should be given to the trade unions for their cooperation in the entire matter.

Thirdly — I am not talking about this Government alone, I am talking also about previous Governments — we are not approaching our partners in the Common Market in a fashion determined enough when they try to put us into this Catch 22 situation of allowing us to modernise a plant and then putting in a quota which means that the whole operation is not viable.

An Cathaoirleach

Before I call on the Minister, this business must adjourn at 5 p.m. in order to take item No. 9.

Minister of State at the Department of Industry and Energy (Mr. E. Collins)

My time for reply is, therefore, constrained. I thank the Senators for welcoming the Bill and I would like to point out that the future of Irish Steel and employment prospects there are important to the Government. Reference was made to apparent cost overruns. The project was conceived in the middle seventies. The period during which it was built, leading up to 1981, was one of heavy inflation. This, combined with design changes and certain delays in currency problems, led to what has been described as a cost overrun. The Government are concerned with regard to cost overruns in the public sector in general. It was for that purpose that the Minister for Industry and Energy and I met the semi-State bodies under our aegis. Part of the reason for the meeting was to ensure that the State companies adopt a plan that is visible and understandable and, therefore, that there would be some planning mechanism visible to the Minister and the Department so as to avoid in the future what are described as cost overruns. I should like to thank Members for their contributions. I would be grateful if the Seanad dealt with all Stages now.

Question put and agreed to.

Agreed to take remaining Stages today.

Bill put through Committee, reported without recommendation, received for final consideration and ordered to be returned to the Dáil.