I move:
That paragraph 1 of the Orders of Reference of the Joint Committee on Commercial State-Sponsored Bodies, constituted pursuant to the Order of Dáil Éireann of 21st June, 1983, and the Order of Seanad Éireann of 29th June, 1983, be amended by the deletion of all words after `Bodies)' where it first occurs and the substitution therefor of the following:—
`to examine—
(a) the Reports and Accounts and overall operational results, and
(b) in the light of the reports published pursuant to sub-paragraph (a), the common issues relating to Board responsibility, structure and organisation, accountability and financing, together with the relationship with central Government and the Houses of the Oireachtas
of State-Sponsored Bodies engaged in trading or commercial activities referred to in the Schedule hereto and to report thereon to both Houses of the Oireachtas and to make recommendations where appropriate.'.".
I should like to explain to the House that the Minister, Deputy Bruton, had hoped to be present in order to speak on this motion. As Senators are aware, it was his initiative in Government that led to the setting up of the various committees. Unfortunately something arose at the last moment and he is unable to be present. I would like the indulgence of the House, in moving this motion, to read the speech which Minister Bruton had prepared. What I have to say will be said not merely on my authority as Leader of the House but also on the authority of members of the Government.
Since the foundation of the State, the State bodies have been a major source of commercial and entrepreneurial innovation in our economic and industrial development. They have, however, been subject to growing criticism in recent years for a variety of reasons, principally because of the overall deterioration in their financial performance. In addition, in recent times some costly investment errors have been made by State bodies and in certain cases charges are excessive for the services which they provide. As announced in the White Paper on Industrial Policy published last year, the Government are concerned at these developments and are anxious that the State bodies should re-establish themselves as a source of strength to the Irish economy.
In view of the diversity of their activities and the varying reasons for their incorporation into the State sector, not enough serious attention has been devoted to developing a properly structured relationship between the State bodies and central Government. Ad hoc arrangements have continued for too long and there has been insufficient attention to developing the optimum procedures to facilitate the successful development of these bodies. The difficulty has been to devise means of achieving a balance between the legitimate freedom of the bodies to pursue their operations within a commercial framework and the control necessary to safeguard the interests of the public to whom they are ultimately responsible.
No one would deny that the present financial position of the commercial State bodies collectively is very bad. As in the rest of the economy, the recession and adverse cost movements have had a serious effect. However, other factors, some of them unique to State enterprise, have contributed to the present situation.
These factors include:
(1) lack of clarity in objectives, and confusion between commercial, social or strategic roles, particularly where questions of closures or cessation of operations arise;
(2) imposition of non-commercial obligations or arbitrary tax and price adjustments on products or services provided by State bodies;
(3) inadequate surveillance and control in relation to matters such as major capital projects and refinancing;
(4) an expectation by boards, management and employees that Government would be obliged in practice to bail out various enterprises, and honour their debts, and that market disciplines would not apply;
(5) undercapitalisation, and excessive reliance on guaranteed borrowing; and
(6) lack of capacity to adapt quickly enough away from wrong product or market situations.
Whatever the causes of the problems that have arisen, the Government are determined to bring about a major improvement in the performance of the commercial State bodies and a continuing reassessment of their operations in the national interest.
As detailed in the White Paper on Industrial Policy, a number of measures have already been introduced to ensure immediate improvements in the commercial performance of the State bodies. These measures include:
(i) The introduction of Corporate Planning: To ensure that the bodies become more commercially orientated, they have been directed to draw up five year "rolling" corporate plans in respect of their activities. These plans are designed to provide an outline of corporate objectives, the strategies which are being adopted and the detailed programmes to achieve those objectives. In addition, projected production targets and cost reduction programmes will be required on an annual basis.
(ii) Improved monitoring of the State bodies by central Government: The Government have also decided that the arrangements for reporting on the performance by each commercial State body should be reviewed by the relevant Minister with a view to increasing their effectiveness. The new arrangements will include the submission of regular reports dealing with financial and trading particulars, production levels and actual performance against targets.
(iii) New measures to improve the procedures for appointments to the boards of the State bodies: The recent history of our commercial State bodies suggests that, in many cases, boards have been less than successful in their policy and supervisory roles. The reasons for this are many. They can include such factors as lack of appropriate expertise and insufficient in-depth attention by directors to their duties. There may be in some instances an attitude of mind that board appointments are essentially honorary, or there may be lack of clarity about roles and responsibilities.
I want to emphasise on behalf of the Minister that these criticisms must not be taken as referring to all directors. He readily acknowledges the dedicated service which has been given by many eminent individuals from the business world who have been prepared to act as directors of State bodies in the national interest, notwithstanding the modest remuneration involved.
The Government have been very anxious to do something practical to bring a greater degree of professionalism into the appointments procedure and general practice governing the boards of State bodies. In the White Paper on Industrial Policy, a number of decisions were announced to strengthen the boards of commercial State bodies. Board members will in future be selected to more properly reflect the type of skills and expertise required by each body and will also have their role and responsibilities more clearly defined.
(iv) Monitoring and control of investments: New measures are also being introduced to prevent a repeat of the cost overruns of recent years. A more systematic approach is being adopted in appraising capital projects and improved project management techniques are being applied.
The National Development Corporation will also have an important role in co-ordinating and harnessing the entrepreneurial initiative and expertise that lies within the commercial State bodies with a view to developing new employment — creating projects and product ideas. The State bodies will be encouraged through the NDC to explore new viable commercial business opportunities, either under their own ownership or in joint ventures with other publicly or privately owned companies.
One of the most significant developments in recent years as far as increased control and review of the commercial State-sponsored bodies in concerned was the establishment of the Oireachtas Joint Committee on State-Sponsored Bodies in 1976. The Oireachtas has a legislative role relating to the formal establishment of nearly all the commercial State bodies and the Ministers responsible are answerable to it for the overall policies and operations of the bodies. Furthermore, the Oireachtas has the right to debate the policies of the State bodies but, in practice, this has usually been limited to debates on Bills relating to the bodies in question. The establishment of the joint committee, however, heralded an increasing awareness on the part of the Houses of the Oireachtas of the activities of the State bodies.
It is generally agreed that the original committee, which produced 18 reports on individual bodies before it lapsed in 1981, played a very useful role in provoking both public and parliamentary interest and debate on the State-sponsored sector. However, the terms of reference of that committee, as in the case of the new Committee on Commercial State Bodies established in 1983, restricted its role to an examination of the past performance of State bodies. Moreover, the committee concentrated on specific bodies and, in these cases, essentially on their activities and financial results. Very little attention was given to broader areas affecting the role of these bodies.
The Government believe that a general review of the commercial State bodies is necessary and have, therefore, decided that the committee's mandate should be extended to enable them to use their experience in a more constructive manner. The extended terms of reference, as proposed by this motion, will empower the committee to examine the common issues relating to board responsibility, the structure and organisation, accountability and financing, and relationship with central Government and the Oireachtas of the State bodies covered by the committee's existing remit. The committee will of course, also be empowered to report and, where appropriate, make recommendations on these issues.
The Minister would like to take this opportunity to commend the committee for their work which, he believes, will be even more valuable and constructive with their extended terms of reference. The Minister is confident that given the right framework and the right people the commercial State-sponsored bodies can have a major beneficial influence on the future performance and direction of the economy.
May I, having given Senators the views of the Minister, say that I entirely support these views, that I think this committee and the other committees have got off to a very good start and I think that the amendment of the terms of reference that are being proposed now will in fact improve that performance. Accordingly, I commend the change in the terms of reference to the House.
