The Bill provides for the setting up of two separate State-owned companies, An Post and Bord Telecom Éireann, to take over the operation of the national postal and telecommunications services from the Department of Posts and Telegraphs. The basic purpose of this reorganisation is to give the public better postal and telecommunications services nationwide.
The Bill is by far the most significant reform of the public service to be undertaken since the foundation of the State. It involves the transfer of almost 30,000 staff — one-half of the civil service — to the State-sponsored sector. The reorganisation of the Department has been on the stocks now for a considerable time. The Posts and Telegraphs Review Group, who recommended the change, reported as long ago as May 1979. The original text of the present Bill was initiated in Dáil Éireann over a year ago. Unfortunately, successive changes of Government delayed the legislation.
The Bill is designed to implement the 1981 White PaperReorganisation of Postal and Telecommunications Services which was published after the Government had considered comments on proposals in a Green Paper published in 1980. As a detailed explanatory memorandum has been published, and as the House's time is limited, I do not propose to comment in detail on each section. Many of the Bill's provisions are, of course, standard provisions which feature in legislation for State-sponsored bodies generally. I propose to concentrate my comments on the most significant areas of the Bill and, in particular, on the amended provisions inserted by Dáil Éireann on Committee and Report Stages on my recommendation.
In considering the details of the legislation and of the reorganisation it entails, important as they are, I suggest that we need to keep constantly in mind the basic purpose of the whole exercise. This is to improve and develop the national communications services. There is no hint in these proposals of pessimism about the future, or any question of opting out. The thrust is in precisely the other direction. What we are about is the reshaping of the organisation of a major part of our public sector so as to facilitate growth and development, to take advantage of new opportunities and, in general, to meet public needs better.
The postal and telecommunications services are major businesses in their own right. After full and careful consideration, what the review group concluded was that the civil service environment was no longer the most suitable for two such commercially oriented businesses and that a change to State-sponsored status would enable them better to develop and to overcome the challenges facing them in the future. Those conclusions gained widespread acceptance. Since my own appointment as Minister, I have become even more convinced that the change will bring significant benefits. In saying this, I should emphasise that I have nothing but appreciation for the past achievements of the Department. I do not think there is a Senator on any side of the House who would question the contribution which the services and the staff operating them have made to the national life over a long period. By showing openess to change and by thereby taking advantage of the opportunities which the reorganisation will offer, services and staff can maintain and strengthen that contribution in the future.
The choice of form of organisation for a State-sponsored body is between the statutory corporation such as the ESB and CIE on the one hand and the statutory company such as Aer Lingus and Irish Shipping Ltd. on the other. The Posts and Telegraphs Review Group in their report dealt with this matter, and came down in favour of statutory companies. The basic argument in favour of the statutory company is that potentially it offers scope for greater flexibility. This is important in the case of the two new bodies. They will be expected to operate along commercial lines. The more flexibility they have, the greater prospect there is of their achieving maximum efficiency.
It should be stressed that the postal and telecommunications services will remain firmly within the public sector and there is no possibility of privatisation of the companies without further legislation. In this respect then there is no difference between the statutory company and statutory corporation form of organisation for the new bodies.
So far as the legislative provisions affecting staff are concerned, the decision to set up companies rather than corporations makes no difference because the provisions being made to protect the interests of staff are the same as would have been made if corporations were being established. Indeed, many of these provisions are taken from legislation establishing statutory corporations.
The objects and responsibilities of An Post are set out in sections 12 and 13 and the exclusive privilege, or monopoly, is set out in section 63. In essence An Post will be required to provide a national postal service to meet the business and household needs of the State, and also money remittance and counter services. The company's financial duties are set out in section 13, the fundamental requirement being that they shall operate on commercial lines. The exclusive privilege which is provided for under section 63 is granted explicitly in recognition of the obligation to provide a national postal service and of the general financial duty imposed by section 13, and because a viable national postal system involves subsidisation of some loss-making services by profit-making services.
The objects and responsibilities of Bord Telecom Éireann are set out in sections 14 and 15 and the exclusive privilege at section 87. They are on the same basis as for An Post except that, in accordance with a recommendation of the review group, the telecommunications monopoly will apply up to a connecting point in the subscriber's premises. In essence BTE will be required to provide a national telecommunications service to meet the business and household needs of the State. The exclusive privilege is granted on the same general basis as that of An Post.
In effect, therefore, both companies are being granted very extensive monopolies for explicit reasons of general public interest. The ultimate justification for the monopolies will be the performance of the companies in meeting their operating objectives and their general financial duties.
The Bill contains many important safeguards for the staff who will be transferred to An Post and Bord Telecom Éireann. Section 45 protects their position in regard to pay and conditions and continuity and security of employment. Section 46 protects the staff fully in regard to the superannuation benefits which they will have earned up to vesting day, and it also provides that payment of benefits, whether earned before or after the vesting day, will have the same security as applies to payment of civil service pensions. Section 16 requires that each company set up machinery, in consultation and agreement with recognised trade unions and staff associations, for the purposes of negotiations concerned with the pay and conditions of service of their staff. An Post are required to set up similar machinery for postmasters at sub-post offices. Section 34 provides for election of employee directors to the boards of An Post and Bord Telecom Éireann and section 81 provides for the election of a postmaster director to the board of An Post. I would hope that the provisions in the Bill affecting staff will be seen as comprehensively reassuring to the staff who are faced with this major change of status. I am most anxious that the companies should commence operations with staff who believe that they have been fairly treated and who will, consequently, give their full co-operation to both companies from the outset in the difficult tasks facing them.
I propose to comment briefly on the proposed financial arrangements for the two companies. Taking the postal company first, it is proposed that the assets appropriate to the service which are valued at about £32.5 million will be assigned to the company in exchange for shares. As provided for in section 18, the initial capital structure of the company will accordingly consist of 100 per cent equity capital. This does not involve a draw on the Exchequer because investment in the postal services was met from the Vote of the Department of Posts and Telegraphs and the assets are, therefore, debt-free. Under section 31 of the Bill, it is also proposed to provide working capital not exceeding £10 million for the company in exchange for shares. This is the estimated working capital required by the postal service in 1983.
Section 29 provides enabling power for the Minister for Finance to make an amount not exceeding £20 million available from the Exchequer as current expenditure grants over a period of three years. This is in recognition of the potentially difficult financial situation which the company will face in their early years.
Section 29 also contains enabling power to make available not more than £50 million from the Exchequer for postal development, either in exchange for shares or by loan or a combination of these. In this connection, it is likely that the position set out in the 1981 White Paper will obtain in the years immediately ahead, that is that there is need for relatively heavy capital investment in the postal service during the next five years, that the scale of the programme is large by reference to the fixed assets appropriate to the service, and that it is likely to be some time before the financial position of the company would enable them to contribute in any significant way towards financing a development programme.
To sum up, the Government recognise that there is a strong case for providing assistance for the postal service during its initial development period. The enabling provision in section 29 of the Bill will be activated in the light of the development plan produced by the company.
In contrast with the postal service, telecommunications is a highly capital-intensive service. By the end of 1983 the current value of the fixed assets is expected to reach about £1,500 million. About £275 million of the assets will be debt-free. Of the remaining £1,225 million, £725 million represents Exchequer loans and £500 million represents assets financed by leasing arrangements with Irish Telecommunications Investments Limited. If the debt-free assets only were assigned to Bord Telecom Éireann in exchange for shares in the company, the debt-equity ratio at the end of this year would be over 4: 1.
Continued heavy capital investment will be needed for development of telecommunications services within the foreseeable future and charges on the £1,225 million loan capital would be a continuing heavy drain on current income. Having considered the position, it was decided that it would be undesirable to set up the company under such arrangements. It is accordingly proposed to transfer £355 million worth of assets covered by Exchequer loans plus a further amount, estimated at about £80 million, in respect of leasing charges outstanding to ITI Ltd., in exchange for shares in the company. This is dealt with in sections 10 and 18 of the Bill. The debt-free assets will also be transferred in exchange for shares. This will give Bord Telecom Éireann a debt-equity ratio of about 1: 1.1 at the end of 1983. This is considered to be a satisfactory debt-equity ratio for a public sector company providing, in the main, services which are protected by a statutory monopoly. Bord Telecom Éireann will be making their own arrangements for the financing of their investment programme in the future.
As in the case of An Post, working capital will be provided under section 31 of the Bill for Bord Telecom Éireann in exchange for shares. The value of the net current assets of the telecommunications service at vesting date will be made available to the company as working capital in exchange for shares up to a maximum amount of £150 million, which represents the estimated working capital requirements in 1983.
The Bill sets out in some detail the powers and functions of the Minister in regard to public policy related to postal and telecommunications services. It provides for the setting of financial targets for the two companies by the Minister following consultation with the companies and the Minister for Finance and for the publishing by the companies of particulars of the cost-effectiveness of their operations as determined by criteria to be settled by the Minister.
Broadly, the principle that has been followed has been to allow the companies the maximum freedoms and flexibilities to operate and develop the services while reserving to the Minister the necessary powers of monitoring and control in the public interest.
I would like to direct Senators' attention to the amendments which have been made to the Bill as initiated. In all, the Dáil made nearly 150 amendments on my recommendation. In a debate that went on before this Bill I was interested to hear Senator McGuinness talk about the reluctance sometimes of Ministers to accept amendments. In tabling the 150 amendments I took very fully into account the views expressed by the trade unions and by Deputies in the Dáil, particularly Deputy O'Sullivan who has contributed massively to this Bill, and also to proposals by Members in the House. Indeed, I have been criticised for being so open in that respect.
Since taking office, I have undertaken extensive consultations about the legislation with various concerned Members of the Oireachtas, with the recognised staff organisations and with the two Interim Boards for Posts and Telecommunications. In the course of these consultations, a large number of points were put to me in regard to possible amendments to the Bill. As I think Senators will appreciate from the number of amendments I moved in the Dáil, the approach I adopted was to do everything that was possible and reasonable to meet the legitimate concerns of Deputies and Senators and of the staff and the interim boards. However, I would stress that the basic form and purpose of the Bill remains unchanged and I am very glad to note that the principle of reorganisation and the legislation generally continues to enjoy bipartisan support.
The amendments which have been incorporated in the Bill as passed by the Dáil fall fairly naturally into a small number of categories. An important category comprises those amendments which are designed to meet staff concerns by improving and copperfastening the guarantees and protections for staff who will be transferring to the new bodies. I will be returning to this subject later but perhaps it suffices for me to say at this stage that I have done everything humanly possible to meet fully and fairly the reasonable concerns and entitlements of staff.
A second group of amendments is concerned with strengthening the exclusive privileges of the new companies in the provision of postal and telecommunications services. In particular, there was general agreement that the penalties for breaches of the exclusive privileges, which date back to the 1869 Telegraph Act and the 1908 Post Office Act, were badly in need of review. Another set of amendments is designed to underline the point that, while the new companies will be given the necessary powers and flexibilities to operate and develop the services to best advantage, the postal and telecommunications services will remain, under the reorganisation, firmly within the public sector. Amendments have been incorporated to provide that shares in the new companies could not be disposed of by the Ministers concerned without fresh legislation and that the essential reserve powers of the Minister to issue licences for the provision of services within the exclusive privileges of the new companies could only be activated by statutory order and in accordance with specified standards. Before I came into the House this afternoon my attention was drawn to omissions in two other sections of the Bill which I will be correcting on Committee Stage.
Finally, I took the opportunity to propose amendments to the Bill designed to further the interests of consumers, for example, by including an enabling provision to permit me to assign additional functions to the new statutory users' councils. I am also proposing to protect users of the postal and telecommunications services from interference with their mail and their telephone communications. Two new sections have been incorporated, one to prohibit the unauthorised opening etc. of postal packets, the other to prohibit the unauthorised interception, etc. of telecommunications messages and to regulate the use of overhearing devices. Breaches of the provisions would constitute offences and would be subject to the penalties provided for in the Bill. The Government intend these new provisions as important contributions to the privacy and general civil rights of the public who are users of the services.
In the course of the Dáil Report Stage debate on section 45 of the Bill, which contains provisions relating to the staff to be transferred to the new companies, I undertook to have another look at the section to see whether anything further could be done to strengthen it, and so to allay any residual anxieties of staff who will be entering the employment of the new companies. I made it clear at the time that I could not see scope for further improvement because the parliamentary draftsman, it seems to me, had done all that he had been asked to do. The section as amended in the Dáil is designed to ensure that staff will be guaranteed employment in the new State-sponsored companies on terms no less favourable than they have now, and that they will have the same degree of security of tenure in the new companies as applies in the civil service. I confess that it has been very difficult to see what further amendments could be made to improve the section. However, I will be proposing on Committee Stage two amendments to section 45 which I sincerely hope will remove any remaining doubts and apprehensions.
I may say that the purpose of the various amendments made and proposed in regard to security of tenure is to ensure by legislation what successive Ministers, including myself, have stated would be the practical situation, that is that the staff's tenure of employment will not be worsened by the reorganisation. I am satisfied that section 45 as amended will fulfil the solemn undertakings given by me and by my predecessors, and I am satisfied that the boards of the new companies will be scrupulous in ensuring adherence to the expressed intent of the legislation regarding security of tenure. In the unlikely event that it is needed, there is provision for appropriate appeal to the Minister for the Public Serice.
I am fully aware that this is a vital and sensitive issue for the staff and that is how I have approached it. I am happy to put it on the record of the House that I am satisfied that the provisions in regard to security of tenure will provide all the assurances and protections that any reasonable person could require and, in particular, that they ensure that the security of tenure of transferred staff will be not one whit less than it would have been if the staff had remained civil servants. I am sure that that is what the House would wish. In the section as amended — assuming the House agrees — we will not only be giving assurances but we will be repeating and reiterating the assurances three times at least in the same section.
I would like to say a few words about the services which the new board will be taking over. The nature and range of the mail services have not changed substantially over the years. Because of the developed nature of the service, its progress in general has been one of modest growth. In the past few years, no doubt because of the economic recession and the substantial increases in charges necessitated by inflation, traffic volumes have been stagnant at best although this year there is some indication of renewed growth. That is not unconnected with the fact that there has been no price increase this year, something I have insisted on since I became Minister. The quality of service is very good by international standards although we are still somewhat short of attaining our main service objective of delivering 90 per cent of letter mail by the working day after posting.
An efficient and reliable postal service will enhance public confidence in the service and, when economic activity picks up, enable it to recover lost traffic. One of the primary tasks of the new postal company will be to continue the efforts of the Department to improve the quality and reliability of the service. In coming years, the postal business will have to meet increasing competition from alternative means of communications, arising especially from telecommunications developments. The service does, however, have its own inbuilt advantages. For example, it is unique in its coverage of every home and business in the country. By utilising its advantages and exploiting the opportunities which the new environment will offer, I believe that the service can make steady progress.
On the telecommunications side, we are now in the fourth year of the five-year development programme which was admitted by everyone when it was undertaken to be ambitious and far-reaching. The programme set six main objectives:
—to wipe out the waiting list for telephones,
—to convert all manual exchanges to automatic working,
—to extend STD to all areas of Northern Ireland and Britain,
—to reduce call failure on the automatic system to 2 per cent on local calls and 4 per cent on internal trunk calls,
—to answer 90 per cent of calls made via operators within ten seconds,
—to provide an acceptable repair service.
At the beginning of the programme in 1980, the waiting list for telephones was over 90,000 and represented the equivalent of over two years' capacity. The waiting list at the end of this year will be about 50,000 or the equivalent of eight to nine months output. That is substantial progress. Over all, the position is that the target of being able to meet applications for telephones promptly by the end of next year over the country generally is in prospect.
At the beginning of the programme, about 10 per cent of telephone subscribers had only a manual service provided by over 500 manual telephone exchanges. The programme for completing the conversion of these exchanges to automatic working is on target and should be completed by the end of next year or very largely so.
STD was extended to all areas in Northern Ireland late last year and to all of Britain in April and June of this year. The overall position now is that some 70 per cent of subscribers here have international dialling to over 70 countries.
The failure rate on trunk calls within the country at the beginning of 1980 was at the altogether unacceptable level of over 40 per cent. The present trunk failure rate on routes out of Dublin is now below 20 per cent while the failure rate in the reverse direction is about 16 per cent. The target this year is to reduce the rate to 12 per cent or so, and a failure rate of 4 per cent by the end of next year is in prospect.
The speed of answer by telephone operators in many places has been quite unacceptable, due to no fault, I should add, of the operators. With the extension of automatic service and improvements in the network, however, the way is now being paved for giving a first class service. Already, in Dublin, where the service had been quite poor, the improvement has been dramatic and for long periods all calls, not just 90 per cent, are now answered within ten seconds. Similar improvements should be possible at other major exchanges throughout the country by the end of this year.
The standard of repair service when telephone lines go faulty is a critical factor and in certain areas the time taken to carry out repairs has been excessive, in some cases very considerably so. This will come right over the next year or so although I am afraid that, in some instances, the improvement may be gradual.
This then is a thumbnail sketch of the service as the board of the new company will find it. There are undoubtedly plenty of improvements to be made but I think it can fairly be said that the groundwork for a first class service has been well and truly laid by the current development programme.
The legislation is enabling legislation and, under section 9 (2) of the Bill, it will be the responsibility of the Minister to fix the vesting date for the two companies. A number of detailed transitional matters relating, for example, to staff transfer arrangements, accounts, files and records will have to be dealt with. In particular, consultations with staff organisations about matters affecting staff will continue following the enactment of the legislation by the Oireachtas because many of these matters would not appropriately be covered by the legislation. In determining a vesting date, the position in regard to consultations with the staff organisations will be an important factor to be taken into account.
As I said in my introduction, this matter has been on the stocks for a long time now, and it is in the interests of the services and of all concerned in them that the uncertainty involved should be ended as soon as possible. My aim, therefore, is to vest the new companies at the earliest practicable date. For practical reasons, it is desirable that vesting should be on the first day of a quarter, and, at this stage, a reasonable target would seem to be 1 January next. Vesting will, of course, be sooner if we can manage it.
In conclusion it would, I think, be appropriate to look to the future. I know that the interim boards, An Bord Poist and An Bord Telecom, have been drawing up plans for the improvement and development of the services. I have been most impressed with the commitment of the two boards to the reorganisation, a commitment which, to the credit of the boards and their chief executives, has survived the unplanned delays to the legislation. The period of the interim boards' existence has also been one of continued economic difficulty and the resources which it has been possible to make available to them for planning and for preparing to take over the operation of the services have quite frankly been very restricted and much less than successive Ministers would have wished. Their commitment has survived these difficulties also but, nevertheless, in our early expectations of the boards, we must recognise these realities. To a degree, the boards have had a thankless task waiting for so long in the wings and I would like to take this opportunity to express my sincere appreciation of the services of Fergal Quinn and Michael Smurfit and the members of their respective boards.
I referred earlier to the opportunities and the exciting prospects which are opening up for both companies. But let there by no doubt about it that the challenges facing the boards are most formidable. No one should expect instant solutions to our communications problem. The new companies will need time to make themselves felt and will need the particular understanding of Government and public in their early days. I have no doubt, however, that we can look to the future, in the medium and long term, with every confidence that the public and national needs for first-class communications services will be fully met and I confidently commend the Bill to the House.