Seanad Éireann debate -
Wednesday, 21 Dec 1983

Vol. 102 No. 9

Electoral (Amendment) Bill, 1983. - Fóir Teoranta (Amendment) Bill, 1983: Second Stage.

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

Minister for Finance (Mr. Dukes)

This Bill has a number of objectives, firstly, to raise the limit on the borrowing powers of Fóir Teoranta — the State rescue agency; secondly, to raise, in parallel, the limit on Exchequer advances to Fóir; thirdly, to increase the maximum number of directors of Fóir from seven to nine to enable direct ministerial representation on the board; fourthly, to discharge the company from the liability to repay about £10 million in Exchequer advances in respect of assistance given to companies which is now deemed to be irrecoverable.

There has been an enormous increase in Fóir's spending in recent years. In 1981 Fóir spent £4.8 million. In 1982 spending had grown to £14.1 million; this year's outturn is likely to be as high as £23 million; and £27 million has been allocated in the 1984 Public Capital Programme. All of this is a reflection of the recession which has had such a severe impact on our manufacturing sector over the past few years. The legislation which fixed the present limits of £70 million on Fóir's borrowing powers and on Exchequer advances to Fóir was brought before the Houses of the Oireachtas two years ago. At that time it was expected that the increased limits would suffice for four or five years. Yet, in the period since then, Fóir's spending has accelerated to such an extent that the present statutory limits will very shortly be reached. The primary purpose of this Bill is accordingly to increase these limits to enable Fóir's operations to continue without interruption.

Fóir Teoranta were established in 1972 to provide finance for industrial concerns which might be in danger of going out of business because of inability to obtain their financial requirements from the normal commercial sources. The criteria for Fóir's interventions are laid down in the 1972 Fóir Teoranta Act. The employment content and the capital employed in companies seeking assistance must be significant either nationally or locally, and the owners must have made a reasonable contribution to the total capital. Furthermore, the company must demonstrate that their failure to receive financial assistance would have serious repercussions at national or local level. Finally, and of greatest importance, the concern must have reasonable prospects of returning to profitability on a permanent basis. To date, Fóir have assisted about 450 concerns, almost half of them on more than one occasion.

The period since the enactment of the last Fóir legislation in early 1982 has seen some major developments for the company. Upon their establishment, Fóir made an agreement with the Industrial Credit Company under which the ICC provided management services, including staff. This agreement was terminated by mutual consent earlier this year. The decision to terminate the agreement was taken by Fóir's board of directors in the context of a general reorganisation and expansion of the company to meet the increased demand for their services. Fóir now have separate divisions dealing with new clients and with the monitoring of existing clients. Their management executive unit has also been doubled in size. This is an especially significant development since management problems are generally regarded as a major cause of difficulties experienced by industrial concerns. Fóir, through their expanded management unit, are now much better equipped to probe management weaknesses in concerns requesting assistance, to advise on organisational and management changes required as a precondition to a financial rescue package, and to work closely with the concerns in carrying through these changes.

Another important development has been Fóir's decision to discontinue publishing the names of their clients so as to enable their relationship with their clients to be on the same footing as that of other financial institutions. The board of Fóir have emphasised the importance of this change in policy on several occasions both to me and to my predecessor. They are satisfied that this decision has already had a beneficial effect in that it has made firms less reluctant to approach the company, thereby enabling Fóir to help them before their positions have become irretrievable. I am aware that there has been some adverse comment about the nondisclosure of the names of companies receiving financial assistance but if, as Fóir say, its effect has been to encourage more firms to seek assistance before it is too late, thereby saving badly-needed jobs, then I believe it will be seen as a positive development.

There has always been close co-operation between Fóir and the Industrial Development Authority in rescue activity. Both agencies are conscious of the need at all times to strengthen and formalise this co-operation. The chairmen and chief executives of both organisations meet on a regular basis to discuss matters of overall policy. Earlier this year Fóir and the IDA negotiated liaison arrangements. In general, Fóir take the lead where financial or other restructuring of an existing business concern is required, while the IDA are primarily responsible for takeover, joint venture and similar cases. Over time, this agreement should increase the effectiveness of State assistance to industry.

I am sure the House will understand that, because of the nature of the company's operations and objectives, Fóir have a particularly difficult task. We can all be satisfied, however, that Fóir carry out their functions conscientiously and that they consider applications for assistance thoroughly and with a full understanding of all the implications of their decisions. I would like to pay a personal tribute to the board and staff of Fóir for the way in which they have carried out their task. In 1982 alone, the board of Fóir approved assistance amounting to almost £23 million for 84 concerns employing almost 8,000 workers. There was an even higher level of activity in 1983. This clearly demonstrates the need for an agency of this kind particularly in today's difficult economic circumstances.

Fóir's operations inevitably give rise to a cost to the Exchequer and to the taxpayer. At the end of 1982, Fóir had a cumulative deficit of almost £20 million. The costs of Fóir's operations are reflected in one of the provisions of this Bill which relieves the company of the liability to repay more than £10 million in Exchequer advances. Similar provisions will arise in future Fóir legislation. The House will appreciate that this situation is an inevitable result of Fóir's role as a lender of last resort. The cost would be higher but for Fóir's diligence in holding to its statutory criterion of helping only potentially viable firms.

I turn now to the provisions of this Bill.

Section 2 of the Bill provides for an increase in the maximum number of directors of Fóir from seven to nine. The purpose of this proposal is to enable representatives of the Departments of Finance and of Industry, Trade, Commerce and Tourism to be appointed to the board. The nature of Fóir's activities is such as to require close on-going contact with these Departments. This close relationship is reflected already in the administrative arrangement, introduced on Fóir's establishment, under which the prior approval of the Ministers for Finance and for Industry, Trade, Commerce and Tourism is required before Fóir can provide assistance above a certain limit. Because of Fóir's increased importance to industry and the resultant implications for both the Exchequer and industrial policy, it is now opportune to strengthen these contacts by placing Departmental representatives on the Fóir board. I am confident that this provision will contribute further to the better co-ordination of assistance from public resources.

It would be possible to accommodate Departmental representatives by reducing the number of directors from the business world. Such a move would, however, deprive the board of some of the expertise of such directors whose practical experience has been invaluable to the company. For that reason I consider that the alternative of increasing the size of the board is preferable.

Before leaving this section, I would like to emphasise that this provision is not intended to — nor will it — reduce in any way the independence of Fóir's board. Neither will there be any diminution of the board's capacity to deal quickly and effectively with the issues and cases coming before it — rather the reverse.

The primary purpose of the Bill, as I have said, is to raise the existing statutory limits of £70 million on Fóir's borrowings and on Exchequer advances to Fóir. These advances are Fóir's only source of borrowings. Fóir's borrowings from the Exchequer now amount to more than £63 million. Sections 3 and 4 of the Bill provide respectively that these limits be increased to £150 million. For convenience, a technical change is being made in relation to the limits which has the effect of bringing the outstanding borrowings of £6.3 million which Fóir took over from their predecessor, Taiscí Stáit, within the overall borrowings and Exchequer advances ceilings for the first time. It is relevant also to mention that section 5 of the Bill discharges the company from the liability to repay £10.24 million in Exchequer advances in respect of amounts which Fóir have formally written off in their accounts up to end-1982 and certain amounts which, although not formally written off, are now regarded as irrecoverable. Taking account of these various provisions, the net effect of this Bill is to increase Fóir's borrowing capacity by about £84 million. This should be sufficient to meet the company's requirements for the next 3-4 years, particularly as the beneficial effects of the emerging improvement in the world economic situation are felt in Ireland.

Sections 6 and 7 are intended to make certain of Fóir's remuneration and superannuation arrangements subject to the approval of the Ministers for Finance and the Public Service. The provisions are those generally applicable to commercial State bodies. It is opportune to introduce these provisions for Fóir at this stage in view of the reorganisation of the company to which I have already referred. These provisions essentially put into a legislative framework powers which the Minister for Finance already has under Fóir's memorandum and articles of association.

As I have already mentioned, there is an administrative limit above which Fóir requires prior Ministerial approval before making funds available. This limit was increased from £250,000 to £1 million following the enactment of the last Fóir legislation early in 1982. I do not propose to increase this limit for the present.

In summary, the purpose of this Bill is to enable Fóir Teoranta to continue their operations and I commend it to the House.

Professor Hillery

We support this Bill and wish it a speedy passage. My contribution will, therefore, be brief. As the Minister has outlined, Fóir Teoranta are the State financial agency for industry and are the lender of last resort. They have played an important role since their foundation but particularly in the past few years because the recession has been more severe and more prolonged than anybody anticipated. The Bill is a reflection of the rapidly increasing demand for Fóir's services.

I should like to spend a moment or two outlining the benefits that accrue to firms supported by Fóir. The aided firms are assisted in the following way: the aid helps to preserve jobs; it saves money in redundancy payments; it saves money in social welfare payments; it contributes towards the balance of payments and it supports jobs in other sectors which supply the assisted firms with goods and services. Given that Fóir Teoranta make a very thorough assessment of those companies which they propose to assist, it seems that the benefits which accrue following aid by Fóir Teoranta are viable on the cost-effectiveness criterion alone, leaving aside the important economic and social benefit of helping to preserve jobs.

I welcome the Minister's reference to improved liaison arrangements between Fóir and the IDA. There is always room for more and better co-ordination among State agencies, especially in a rescue operation. It strikes me that there is room for improvement in the total State approach to co-ordination or rationalisation. On the one hand we may have Fóir Teoranta and the IDA closely liaising to help a company in temporary difficulty and on the other hand there may be very considerable pressure on the company from the Revenue Commissioners to pay arrears of taxes.

Fóir Teoranta obviously perform a very valuable function, especially in periods of economic recession. Their efforts, however, for some years have been hampered by the very short notice they receive from companies in difficulty. I was a member of the Joint Committee on State-Sponsored Bodies which examined the affairs of Fóir Teoranta in 1981 and in their evidence executives of Fóir Teoranta underlined the endless efforts that managements make to conceal the fact that they are in difficulty. I welcome the discontinuation of the publication of the names of companies which are being aided. The problem of the late notice given to Fóir Teoranta is a continuing and worrying one.

In the past Fóir Teoranta have had occasion to criticise severely the poor calibre of management and the bad industrial relations that obtained in firms seeking aid. In the first instance there must be a commitment by the management of these firms to improve their management knowledge and their skills. The educational and training institutions in the management field have an important role in remedying deficiencies in Irish management generally. As a staff member of the UCD Business School I am glad to say that we have made a positive contribution to improving the knowledge, skills and attitudes of Irish managers through our under-graduate courses and, in particular, through our post-graduate courses.

My final point relates to certain of Fóir's remuneration and superannuation arrangements being subject not only to the approval of the Minister for Finance but also the approval of the Minister for the Public Service. I follow the logic of this development. I am very glad to note the expansion in staff numbers in Fóir Teoranta to meet the greatly increased demands on their services. In the same context, I must express serious concern about the recruitment embargo in the public service which is being continued for another 12 months. This blanket embargo is a crude instrument. Only a week ago when the House was discussing another Bill I had occasion to comment on the staffing level in CTT who at present are working 10 per cent under their official staff level. This is so because of the one-in-three formula, whereby only one vacancy in three can be filled. Would the Minister agree that the application of this formula in a blanket fashion is very rigid and inappropriate for certain employments? Surely some form of priority should be devised whereby staffing arrangements, where justified, could be liberated from the blanket public service embargo. I commend the Bill and wish it a speedy passage through the House.

Mr. O'Leary

I must apologise for the large books in front of me. This is because they are only available in that size. They bear no relationship to the length of my contribution.

It is a source of some concern that the Fóir Teoranta (Amendment) Bill should be before us so soon after the 1982 legislation to which the Minister referred. As the Minister has said, it is a reflection of the difficult economic climate in which we find ourselves. There are a number of other provisions in the Bill to which I would also refer. First of all, the expansion of the number of ministerial representatives on State-sponsored bodies continues apace. As I said before in this House, I am against that. The Government are making a mistake in doing it and every time they bring before us legislation to increase the number of directors so as to allow for direct ministerial representation, I shall express my dissatisfaction. Direct ministerial representation is not a good idea. It will inevitably destroy the independence of State-sponsored bodies.

I well recognise that there has been and continues to be a problem of communication between State-sponsored bodies and the Department to which they owe their responsibility or allegience. That problem, in my opinion, is not properly met or dealt with by the appointment as directors of ministerial nominees who are civil servants. There will be the inevitable consequence of that policy that these ministerial nominees will exercise a power of veto over the actions of the State-sponsored bodies. I was a director of a State-sponsored body which had as directors excellent representatives of the Minister — that was the National Building Agency. However, the directors of the National Building Agency who were civil servants had an exalted idea of their own importance relative to the remaining directors. The executive of the agency paid more attention to what they said and over a period they acquired a quasi-veto over the operations of the National Building Agency because they were able to suggest — even in the most minor matters — that it was the wish of the Minister that certain things should be done. That is all right because, of course, the civil servants appointed would be excellent people, but if anything goes wrong in those State-sponsored bodies the responsibility instead of resting as now with independent people who can be dismissed or changed by the Minister will rest with the civil servants and, through them, with the Minister. The more control the Minister exercises over State-sponsored bodies, the more responsibility will be his if, at any time in the future, the wrong decision is taken.

I recommend that the Minister would, in this and in other cases, re-examine the policy. I will not be proposing an amendment to this Bill tonight but the policy as it applies to all State boards needs re-examination. From my personal experience the ministerial representatives who are civil servants will acquire a position of dominance on those boards. In due course that position of dominance, even if it is never abused, will mean that the responsibility for any incorrect decision which the State-sponsored body might take, will rest with the Minister. It may well be that, from time to time, civil servants are the best people to be appointed to an individual board and there is no reason why they should not be appointed. However, the idea of direct ministerial appointment of civil servants within his Department or that of another Minister, by reason of the fact that they are civil servants within that Department, goes counter to the independence which is an essential part of our State-sponsored body structure.

The second point I want to make is that during the course of the Second Stage debate on the Fóir Teoranta (Amendment) Bill, as it was in 1981, which was passed on 19 January 1982, I made a contribution at column 12, Volume 97 of the Official Report. I stand over everything that I said then, but there is one aspect to which I would like to bring the attention of the House again. The Joint Committee on State-sponsored Bodies investigated Fóir Teoranta and reported in their 17th Report, which has already been referred to by Senator Hillery. This report was most valuable because it laid down and discussed criteria. During the course of the investigations and cross-examination which took place, Deputy Liam Lawlor inquired — beneficially in my opinion — as to the policy of the company concerning the taking up of share capital in Cerebos. He got from the representatives of Fóir Teoranta the information that approximately 10 per cent of the advances which they were making were by way of share capital and that 90 per cent were by way of interest-free loans. Any policy which is based on providing 90 per cent of the money which a company needs from a lender of last resort on an interest-bearing basis is bound to fail.

Consider the position of a company which go to Fóir Teoranta. Very often they are in an extremely serious position. They have of course to meet the criteria set down, including, for example, that failure to help them would have serious repercussions, either locally or nationally, and that, having been helped, they would have reasonable prospects of profitability on a permanent basis. But very often the capital base of these companies has been eroded completely by the time help is given by Fóir Teoranta and there is no shareholders' equity left at that stage. Therefore, typically the company seeking assistance has gone through a few bad years and effectively has no shareholders' funds invested. It is, therefore, in the same position financially as if it was starting afresh.

What company can be considered viable if all its share capital is to bear interest? That is what is being done. This company is being refinanced from a situation in which its shareholders' equity has been eroded. Rather than, as would be the norm in a company of that size, insisting that a substantial portion of the initial investment would be by way of shareholdings and non-interest-bearing investment, in this case one is insisting that a company, in a similar position to one starting up, should be financed totally by interest-bearing capital. By definition it cannot be viable. By definition the situation is that that company has been trading for some time and there is none of the shareholders' equity left. If money was invested in the normal proportions, of giving a debt equity ratio of 50:50, in those circumstances, there might be a good prospect of the success of that company. But what company can be prosperous when its capital base is made up totally of borrowed money? In those circumstances very few companies can be viable.

So that the House may understand, I might reiterate what is the position. Very often in the case of such companies substantial money would have been invested in them by their promoters and substantial additional money may be invested by their promoters. But very often, at the stage at which they get help from Fóir Teoranta, there is no shareholders' equity left. Even if they put in more money it may be only to reduce the adverse balance there is in respect of the erosion of shareholders' funds. Therefore, one is asking a company which has been trading for some time to continue to trade and service totally its financial requirements by way of interest-bearing loans. That is not practicable. When one says that a company must be viable, that does not really solve the problem. A company may be viable if it gets a certain amount of money by way of non-interest-bearing capital and the remainder by way of interest-bearing loans. But exactly the same company doing exactly the same job but being forced to take all of its finance from an interest-bearing source will not be viable at all.

In my opinion the necessity is for a lot more of the money of Fóir Teoranta to be invested by way of shareholdings and a lot less by way of loans. That gives rise to the situation in which, unfortunately, the State, indirectly, will be acquiring shareholdings in private companies to a greater and greater extent. Unfortunately also that is one of the consequences of the type of society in which we live. From time to time we may be able to divest these companies, as they prosper, of the State's proportion of their holding. We should not be afraid to do that either. But we should recognise that in countries such as France and, say, Italy — where such rescue operations have taken place — a substantial portion of such companies' industrial base is owned by holding companies which are themselves State-owned. We should not be afraid of that; we should welcome it. We should understand that it is a practicality in this day and age that this sort of thing should come about.

I said on the last occasion, and I reiterate now in greater detail, that it is vital that the amount of investment by way of non-interest bearing shareholding which Fóir Teoranta would give to its applicants would increase dramatically from the 10 per cent it was on the occasion of the last debate we had on this matter in this House. That is the second point I would bring to the Minister's attention.

I should like to refer briefly to a company in which Fóir Teoranta were involved in Scarriff. I made a similar reference on the last occasion, but it is a good example. Fóir Teoranta got involved in the management of Scarriff some years ago and the company did not prosper. I am not talking about the present situation because that matter has been discussed in the House already on a Matter on the Adjournment. But it is true to say that the company did not prosper. Probably also it is true to say that, given the type of processing equipment the company possessed, it would have been very difficult to make it prosper, and that investment in new machinery would have been an absolute prerequisite for a successful operation of a company like that in Scarriff in the future, which I sincerely hope will take place. But Fóir Teoranta got involved in the management of that company and it was not successful.

Imagine the pressure the Minister will be under in the future if a situation like that arises in which he has direct Ministerial representation on the board. At the end of the day Fóir Teoranta around 1981 were able to extricate themselves from the situation in which they were managing the Scarriff company and handed on to another company which has since got into difficulty. But at least there was some prospect of Fóir Teoranta getting out of that difficult situation in which they had been placed through force of circumstances. I would emphasise to the Minister that that was possible at least partly by reason of the fact that there was a clear distinction drawn between Fóir Teoranta and the Minister of the day.

I should like to refer briefly to the fact that our timber processing industry has been helped dramatically by Fóir Teoranta over the years, without any great degree of success, indeed without any success at all because successively, Clondalkin, Munster Chipboard, Scarriff and Irish Board Mills in Athy have all closed even though each had been helped by Fóir Teoranta. Part of the reason they closed was occasioned by the problem of their paying interest on all the money they borrowed from Fóir Teoranta.

There is necessity for a re-examination of the use we make of our natural recources, like timber, to recognise that private individuals will be unable to run timber-processing plants when the State owns the forests. In most other countries the private individuals own the forests and the State the processing plants. For instance, that is what happens in Sweden — which we might regard as a very socialist country — where the private individuals own the vast majority of the forests and the State, directly or indirectly, owns the processing companies. That is where our problem has arisen, in that we own the forests, the profitable end, and we expect private industry to look after the processing which it is physically incapable of doing. In the United States of America, in North America in general, the same companies own the processing plants and forests, and one subsidises the other. Always the forests must subsidise the processing end. That has been the reality of producing the timber-based products in Ireland over the years.

The decision to raise the amount of money under this Bill which the company may borrow from £70 million to £150 million has the full support of this side of the House. The Bill in general has our full support, subject to the various problems I have mentioned and to which I hope the Minister will refer in replying.

Mr. Fallon

My contribution will be very brief on this very important Bill. As has been said by others a similar Bill was before the House almost two years ago which received the full support of the House. This Bill has my support and that of my party.

I am not surprised that we have had a Bill like this so soon after the 1981 Bill, for the obvious reason that we are going through very difficult economic times, times when companies are finding life extremely difficult. It is totally understandable that they should seek rescue at this point. Many of them would have gone long ago but for the concern and the diligence of Fóir Teoranta. I congratulate them on the very good work they are performing. At the same time, I wonder about the possibility of an extension of the activities of Fóir Teoranta. The taxpayers are paying for a plethora of agencies for the training of young people and middle-aged people for short-term jobs and for long-term jobs, jobs that I regret very much are just not available. In other words, there is ample training but no jobs at the end of the day. I am sure taxpayers would not mind contributing to an extension of the activities of Fóir Teoranta. I am certain they would not mind an extra 1 or 2 per cent deduction from pay in order to help ailing industries, not just the manufacturing kind but the building and catering industries.

We have the example of the recent case of the PMPA insurance group whose customers and the customers of every other insurance company in the country, whether they be motor, fire or public liability insurance, are contributing 2 per cent on their premiums for a fund to help out the PMPA. Perhaps we could ask the people to contribute towards an extension of the activities of Fóir Teoranta, to enable them to rescue all ailing industries. In the absence of a strategy for jobs for our young people I am confident that the people would rally to save jobs in a magnificent way.

On the section dealing with the increase in the number of board members from seven to nine, I agree with the sentiments expressed by Senator O'Leary. The existing board members, who we have all said are doing a good job, might feel that in some way their powers were being taken from them, that there was a lack of confidence in them and that people were being put in to watch them. I have nothing against the extension of the board from seven to nine but I would prefer that it would consist of people who have been tried and trusted, people who have been in the business community all their lives and who understand the problems of that area.

I do not wish to detain the passage of this legislation any longer. It has my support but it is very regrettable that we should be coming back looking for this increase in borrowing for Fóir Teoranta. My hope would be that the Minister, if he could see his way to extending the powers of the operations of Fóir Teoranta, would do so. Fóir Teoranta will continue to be an important organisation in the life of this country.

Mr. Browne

In accepting that Fóir Teoranta are doing an excellent job in this difficult time, when firms are getting into difficulties, I want to deal with one specific part of their business which arises from a case I know of in Carlow. Keenans of Bagenalstown who were a very important firm have gone out of business. They were in farming machinery and structural steel. Fóir Teoranta carried out an investigation into this firm and decided they merited a loan of £450,000, that that amount would make them viable and bring them into a position where they could carry on until times were better. For some strange reason, and I am going only on what I hear from workers and from other people in Bagenalstown, the banks decided that when they had Fóir Teoranta money they would change their system of financing the firm. As a result, the workers who had worked their normal week and gone in and cashed their cheques found that the people who cashed them were without money because the bank did not honour the cheques. Their week's work was gone and the business people in the town were short of the money they had given out.

I find it a contradiction that Fóir Teoranta can go into a firm, do an assessment on them, obviously know what arrangement they have with the banks, and then it appears that the bank can do its own Houdini-type act, bail itself out, even though in this case they did not use the £450,000 that was given by Fóir Teoranta — £250,000 was the amount used. It is a cause of concern that public money that is paid by taxpayers can be pumped into a company while all it is really doing is not to keep the company going, not to help the workers, but to save a bank from fulfilling their commitments. This is something that is causing a lot of unease. I should like to know if banks are in that position, if they do that and if they can, should Fóir Teoranta not see to it that they cannot be left high and dry? Instead of making a company viable this action just causes further debts.

Mr. McDonald

I rise to support the Bill and to welcome the Minister. There is one small point which I came across recently where a small private company were hit with two or three bad debts to its unit to the extent of £24,000. At that stage they reached the limit of their facilities with the bank and their lending agents closed on them. There is a lower limit inside the company and a volume that the Fóir Teoranta company support but perhaps it would be possible for the Minister, in co-operation with the IDA, to facilitate companies that are viable and are working well but due to bad debts are being forced out of the market through depriving them of liquidity. There should be some way of coming to their rescue.

I very much appreciate the fact that it would be unreasonable to expect the rescue company, Fóir Teoranta, to be in a position to start processing applications from every small operator in the country. We do not expect that. I have great faith in the IDA. They service the small industrialist to a tremendous degree. It is through that medium that we are going to pick up the extra jobs in every parish that are needed to turn around the economy. In hard luck cases where the hard work of the individual industrialist is without question, where his business has been viable and where he is hit by external factors like that, I would ask the Minister to look sympathetically at the legislation and see, in co-operation with the IDA, if they could come to the rescue of people in such unfortunate circumstances.

Minister for Finance (Mr. Dukes)

First, I thank Members of the House for the generally positive attitude they have taken in regard to this Bill. There has been a wide recognition of the necessity for the main provisions of the Bill which are designed to ensure that Fóir Teoranta can keep their operations going and continue to perform the valuable function which they have done for quite a number of years. The benefits of Fóir's operations are evident to all of us, not least to those who work in firms now being assisted by Fóir and firms who have turned the corner as a result of the operations of Fóir.

I wish to deal with some points relating to specific sections of the Bill. The first, mentioned by Senator Hillery, is the problem of the short notice often given to Fóir in applications made by firms. This is, obviously, a very difficult problem. The later it is left — I agree with Senator Hillery on this — the more difficult it is for Fóir Teoranta to put together a package of assistance within the kind of time scale that is required in order to face up to the difficulties of the firm. One suspects, although it is always difficult to prove, that there are a number of cases of firms that have gone into receivership or liquidation that could have been saved had they made an earlier approach to Fóir Teoranta As stated by Senator Hillery, the discontinuation of the publication of clients' names should help in that respect. We have all heard of instances of where the management of firms in difficulty began to think in terms of approaching Fóir Teoranta and somehow the word got out to another lending agency. The management then found to its disappointment and regret that the other lending agency once it heard of an approach to Fóir would immediately begin to close down and call in its loans. That should not happen.

A number of suggestions have been made in other respects that are intended to help to bring firms with difficulties to Fóir at an earlier stage. Some of these suggestions seem to be impractical. For example, it has been suggested that we should consider having some procedure under which the Revenue Commissioners, who are in a position to know fairly often when a firm is heading for difficulties, should alert either the firm or its lending agency that there is trouble ahead. I do not think, and Members of the House will agree, that that is a practical option. The Revenue Commissioners have to maintain absolute confidentiality in their dealings with taxpayers, whether they are firms or private individuals. It would be improper for the Revenue Commissioners to give notice to other concerned agencies that a problem is arising. We should look at that procedure the other way round and urge people in business who are beginning to have problems meeting their commitments in relation to payment of taxes, remittances of PAYE, PRSI and VAT to immediately begin to think at that stage of what corrective measures can be taken. That is without prejudice to the position of the Revenue Commissioners. If a firm finds its cashflow under strain to the point when difficulties are appearing on the tax side, then surely it is time to begin thinking about what is needed in order to overcome that problem. There is a great deal that management of firms could do in order to have cases considered by Fóir at an earlier stage.

Senator Hillery also raised the question of reference in the Bill to certain conditions relating to remuneration and superannuation now being brought forward statutorily for approval by the Minister for Finance and the Minister for the Public Service. He used that to embark on a wider discourse on the general embargo in the public service. I do not intend to follow Senator Hillery all the way down that road but I wish to make the point that we did provide earlier this year, when Fóir Teoranta and the ICC parted amicably, for the extra staff that Fóir Teoranta needed in order to carry out their operations as fully and efficiently as possible. Fóir are well in on the process of taking on the extra staff that were provided for on that occasion. Indeed, the staffing was necessary in order to enable Fóir as an independent body to carry out the job we wished them to do and which Members of this House have congratulated them for doing. The recruitment embargo in the public service is not, as Senator Hillery seems to think, rigid and it does not produce inappropriate situations in many cases.

Professor Hillery

What about Córas Tráchtála?

Mr. Dukes

I just want to make a point to the Senator. I know he is impatient to make a more blanket point than that. In the recent past we have taken measures to ensure that we increase the amount of staffing available in the Revenue Commissioners and in the Department of Social Welfare, to name only two cases. We made provisions to make extra staff available in those areas because we believed it was more important to apply staff and staff resources in those areas than in certain other areas of the Civil Service. Senator Hillery can take comfort from the knowledge that the consequences of that necessary embargo in relation to public service numbers are not absolute inappropriate rigidity in all cases.

Senator O'Leary raised his opposition to the appointment of Ministerial representatives on State-sponsored bodies. At the moment there are already Departmental representatives on the boards of seven of the 22 commercial State bodies and 24 of the 36 major non-commercial State bodies. Many of them existed before Senator O'Leary would have dreamed of objecting. The point he makes is a valid concern but, on the other hand, there is another concern to which we must pay some attention. Much of Senator O'Leary's concern may arise from the fear of what might happen if something goes wrong. He stated this clearly. He said that in the event of the wrong decision being taken, the Minister can be held to be responsible for that decision. On the other hand, there is the positive side to look at. We have to make sure that the wrong decision is not taken. To the extent that an extra input from a Departmental or Ministerial side can round off the consideration by the board of the particular problems with which it has to deal, we can try to insure that the wrong decision is not made.

An Leas-Chathaoirleach

I do not like to interrupt the Minister but Senator O'Leary might still be right.

Mr. Dukes

We will never know until we find out. In the time at our disposal we will probably have to conduct some of this discussion on the basis of contention and assertion as the House has so kindly chosen to do rather than a more analytical argument. In the specific case of Fóir Teoranta there is a situation where the amount of funding being channelled through Fóir has expanded very substantially in recent years. There is an obvious Exchequer interest in ensuring that funds are being applied for the purposes for which the Act makes them available and are being applied in a way that gets the maximum benefit for the people who are being assisted with the greatest degree of efficiency from the Exchequer point of view. This proposal is perfectly in keeping with other provisions of the existing legislation which require, for example, that where the assistance proposed to be given by Fóir exceeds a certain level the decision would require the prior sanction of the Minister for Industry, Trade, Commerce and Tourism and the Minister for Finance. I am not saying that there is no foundation for Senator O'Leary's fear. I appreciate that there is another point of view, and on balance my considered opinion is that the proposal we have in the Bill is the more appropriate way to go about it.

I should like to make it very clear that in making this proposal it is not my concern, as Senator Fallon seems to think, in any way to reduce the powers of existing board members or to give them the impression that they are being watched, or to reduce their idependence or to give them a feeling of insecurity. It is quite the contrary. I want to ensure that the board members, when making decisions, can be even more assured than they are now that all elements relevant to decisions will be brought to their attention so that they can be more confident about their decisions. That is why I have chosen to bring about this representation by additions to the board rather than by replacing any of those now on the board who have given such sterling service to Fóir Teoranta.

Senator O'Leary made some remarks about the way in which assistance is made available by Fóir to companies in difficulties. In illustrating his point he took the extreme case which, I suggest, is an expository device frequently used by the Senator. The 1972 Act allows for a degree of latitude in deciding which is the appropriate way to make assistance available. The particular categories are put together by Fóir, case by case, as seems most appropriate to the case in question. When Fóir make loans to companies, frequently a moratorium on interest payments is part of the package. The general intention in cases like that is that once a company return to profitability they begin to make interest payments.

Fóir have power under the 1972 Act to take out shareholdings and those shareholdings are in the form of redeemable preference shares, something which corresponds to the concern voiced by Senator O'Leary. In quite a number of cases Fóir have chosen this road — there are individual examples that could be given but I do not think this is the proper place to give them. At the end of 1982 preference shareholdings amounted to about 20 per cent of the outstanding balance of Fóir's assistance to firms at that time. It is a road open to Fóir Teoranta, and it is taken by them in cases in which it seems to be the more appropriate way to go about assisting firms in difficulties.

Senator Fallon asked about the possibility of widening Fóir's remit to include other sectors. The first point I would make on that is that Fóir already have quite enough to do in regard to the remit they now have under statute. I refer Senator Fallon to the figures I have given to the expansion of the level of Fóir's activities in recent years. To add sectors of a different kind necessarily would complicate that, although that in itself would not be a sufficient argument for not doing it.

Some of the other sectors to which he referred are ones in which there would be difficulties in applying the kind of criteria which Fóir apply in their present activities, that is, the return to profitability, the development of viability in a firm, and there are some sectors in which it would be very difficult to compose a kind of package that would be parallel to the kind of packages that Fóir now put together. In spite of the expansion in staff that we provided this year for Fóir, they would not now have the capacity to widen their remit. The staff expansion this year was designed deliberately on the basis of Fóir's existing remit. We have given them the staff necessary, as far as we have been able, to carry that out. They have concentrated, obviously, on the industrial sector, and a further expansion in their activities would require us to go to look for people with experience of or insight into the other sectors involved. I do not think that is a road we should follow, particularly because there are other measures that have been taken in relation to other sectors to alleviate the difficulties they have had.

Finally I would refer to a remark by Senator Browne. I think he will understand that I would not now wish to discuss particular or individual cases. I should like to tell Senator MacDonald that, in the kind of circumstances he described, the problems of small firms in difficulties, firms who are being forced out of business by bad debts, that is outside the remit of Fóir, but we can look at other mechanisms for assisting firms who are having such difficulties.

Perhaps it is more a job for the credit institutions in the first instance than for any State agency, and it would depend on the kind of commercial judgments that credit institutions are able to make in regard to any likelihood of getting debtors to pay up and the likelihood of the firms in question being able to stay in business until such time as the debtors pay.

I thank Members for their positive approach to the Bill. I joint with them in expressing regret for having this kind of measure in the first place.

Question put and agreed to.

Agreed to take remaining Stages today.