Election promises on the whole, thankfully, have not all been kept. The idea is obviously to put a new semi-State body on a commercial basis. There you have got what is almost an inherent contradiction. I think this is the real problem with this Bill, because when you are setting up a semi-State body you cannot really run it on a commercial basis by virtue of it being semi-State. I think that the problem with this Bill is that the philosophy behind the Bill too often conflicts with the facts that are actually in the small print. I understand what the Government are aiming at, which is really that the forests of Ireland should be run on a commercial basis. But when you read the Bill, and when you even read the Minister's speech, you realise that they realise that what they are trying to do is actually impossible and that they are not going to be able to do it; but they are going to make the best possible effort at it.
Having said that, I think it is a contradiction, and I would like to explain to the House why. I find there is a certain amount of confused thinking about this sort of Bill. The Minister's speech was full of extremely interesting and very plausible euphemisms. Having said that he had the laudible objective of making money, he then said that the new company will make a loss. He said that the new company will make a loss for a considerable amount of time, but he does not know for how long. To me this is not running anything on a commercial basis. To me that is the opposite of running something on a commercial basis. It is humbug to say we are going to run this on a commercial basis. We are going to set up a company on a commercial basis, but it is not going to make any money. That seems to be defeating the objective of the Bill. The Minister will undoubtedly be able to reconcile those two facts in his summing up speech, but I think it is very important that this be done as soon as possible by the Minister.
I would have suggested to the Minister that instead of introducing this Bill in the way he has, instead of introducing the clauses and the fundings requirements and the funding from the national Exchequer which he is providing, there are other ways of doing it. The Minister has said that £100 million could be provided in shares and advances from the State and £80 million in guaranteed borrowings. To me, by any standards that is an awful lot of money to put into a company which you are going to call commercial but which is not going to make any money. It seems to me that this is a very heavy subsidy with absolutely no great prospect of return in the near future. I know that we say it is a long term investment. I know that the Government's view is that there will be a break even point; but we are very short on projections on this. I am not at all convinced that this is going to work, for reasons which I will outline in a minute.
The principle form of funding private forestry appears to be the EC. I would like to congratulate the Minister for the obvious initiatives he has taken in getting EC funding. I know it is very difficult to get that sort of slice of the cake and to squeeze more money out of the EC for this sort of development. But, as the forestry development here is so behind and since such a small percentage of our country is actually afforested, I see the reasons why he has been able to get EC funding. But what I would have thought would have been far more sensible and far more constructive was to follow up a suggestion which my colleague, Senator O'Toole, made yesterday, and to look elsewhere for funding. I do not believe the State needs to be burdened necessarily with this sort of funding. I do not believe it is essential that the State pays for all the development of the forests of this country.
The reason for that is, as Senator O'Toole said yesterday, that there are billions of pounds in pension funds in this country looking for a home. There are billions of pounds in insurance companies. There are plenty of rich investors whose money is run by merchant banks. If this is a reasonable investment — short or long term, it does not matter — that money will find its way there. What I do not understand is why the Minister instead of burdening the State with this dubious investment, as it is, if he believes it is a really good investment, does not either privatise the forests now or sell them to private interests or allow a market to develop in future afforestation. Because, if these forests have a future value — which undoubtedly they have, I can tell the Minister, and the Minister knows this full well — then because of the way the markets work it means that they have a present value. There will be all sorts of pension funds, private investors, insurance companies, banks who will be prepared to put money into this sort of investment if it makes any sort of sense.
Those who manage money of this sort have got funds for exactly this kind of purpose. That is why I think it is wrong for the Minister to burden the State with it. I would like the Minister to say in his reply that this is too long term or that it is too doubtful or too difficult or too risky; or maybe he will say it is too good an investment and we should not give it to anybody, that we should keep it in the State. Perhaps emotionally and philosophically he believes that this land, this afforestation, should belong to the State and should not be sold off. I do not know. All I am saying is that there is money available, and plenty of it, for this type of investment if the Minister wants to consider that alternative. At a time when the public finances are in such a terrible state I think it would have been more appropriate to look to private industry to subsidise — if subsidise it is — what the Minister has openly admitted will be a loss in the initial stages.
It was a bit depressing to read in the Minister's speech some of the phrases which give us the background to the thinking behind this particular Bill. When he says in that negative way that funding has not been ungenerous, I agree with him. What he means, of course, by that code word is that it has been a very generous piece of funding, and perhaps he means — and I would suggest he means — that it would not stand up to the normal commercial criteria which should be applied to this sort of investment.
The Minister is right: it is not ungenerous. He goes on to say that further support will be necessary after five years. That is exactly the sort of situation which I would be fearful of, the sort of blank cheques type situation which might exist and has existed in other similar type bodies. Having stated funding was not particularly ungenerous, it is a pity to see a bland declaration that in some time in the near future the Minister may have to write another cheque without quantifying how much it would be, without projecting how much it would be; but making it absolutely obvious to the company and to whoever is running the company that further support will be there if it is needed. That is about the worst possible basis for any company to be run on. It certainly does not answer or meet any of the normal commercial criteria.
Having said that, the Minister goes on to say that the company must stand on its own two feet. I again find it difficult to reconcile the fact that the company is going to be drawing heavily on the Exchequer for at least five years and the statement that it will be standing on its own two feet. This Bill has a laudable objective but there is some very confused thinking behind it because it cannot be an independent company; it will not be run as an independent company. They will not think of themselves as an independent company so long as they have the Exchequer backing them in this very generous way.
I was interested in what the Minister had to say about the Civil Service. Perhaps he could explain what he means when he is summing up. It is indicative of a shift in Government thinking and in thinking in this country about the Civil Service and their relationship with the private sector and the commercial world. He says that the Civil Service are not conducive to commercial criteria which I presume means that the Civil Service are incapable of running a company on the basis of making profit, or that the Civil Service are not a commercially efficient organisation. That is something with which on the whole I would agree. It would be interesting to note if this is now the Government's view of the Civil Service. Do the Civil Service need a shake-up? Are the Civil Service not to be entrusted with running a commercial company like this? Are the Civil Service incapable of taking decisions like that? If that is true, what are the Civil Service for? Are the Civil Service there not to take any initiatives? Are they there simply to implement without thought the wishes and the whims of the Government without taking any decision on their own bat? I would like the Minister to clarify this. The Minister said also that the traditional restraints which apply to the Civil Service would be an obstruction to the company. What are those traditional restraints? We are on the point of unveiling some very new thinking about the Civil Service. To back that up I will quote from the Minister's speech where he was referring to the new forestry company.
In the first place a commitment to commerciality must permeate all parts of its organisation. In the past, the development of forestry in this country was not always guided by strict commercial considerations and as I have already said, a Civil Service structure is not the most conducive one for commercial operation. All that must now change. Freed from the constraints of the Civil Service, the company will have the necessary flexibility and freedom to conduct its business in a commercial way like any other private sector company. It will have no excuse to do otherwise and no excuses will be accepted.
It cannot be run like any other private sector company because they are going to be Government funded for at least five years. I find an inherent contradiction in there. Then the Minister went on to say:
Secondly, the company must operate in a cost effective and efficient manner. I mentioned earlier that the current development of our forest estate has a major influence on the break even date and that, because our trees are at a certain stage of growth, it will still take some time before profitability is reached.
What we need to know is vaguely when? "Some time" is not good enough if one is running a company on commercial criteria. Is it five years, ten years, 15 years, 20 years or is it three years? It seems impossible that it will be in the next five years because the Government are obviously going to keep funding them. We have no specific projections. We have no specific ideas. We are being asked to write a blank cheque without any promises. He then went on to say:
There is not much the company can do about that—
I have rarely read as vague a phrase in any speech
—but it can certainly do a lot in terms of reducing its operating costs. I expect it to do so and thus achieve a much earlier break even date than would have been the case if forestry had continued to be operated within a Civil Service structure.
This is a fairly damning indictment of the Civil Service structure. It is totally unspecific in projections, in profit targets, or in any sort of future targets for this company.
If the Government are going to be giving this sort of money to this company, we certainly deserve to hear detailed projections. The Minister has said this will be run as a private sector company. If a private sector company were going to a bank, which in effect is what is happening here, to borrow money or to inject share capital and they said: "It will be some time before we are profitable, but we do not know when, and we will try to reduce our operating costs but we do not know how long that will take. We also think that in five years we will be coming back for more money, but we have no projections", the bank would just show them the door. This is very short on detail but very big on handing out money.
The Minister then went on with some generalised suggestions for improvements. Again these are short on detail. He made comments about the introduction of new arrangements which will reduce the outgoing on purchase and increase income per unit of sales and used the sort of phrases which could apply to any industry. The point I am trying to make here is very simple. If there is a transfer or if there is going to be a change in method, there is no sign of it here. If there is going to be massive Government funding we are entitled to ask for answers before it is granted. There may be a very good reason for this, but if the investment is as good as the Minister says, the funds should be there but the details should be there as well.
The Minister finally summed up by saying:
I do not accept that this is just another "SSB". I expect far more than that and if I do not get it I will give the board a very hard time.
I am delighted to hear the Minister say he will give the board a hard time. The Minister's phrase "just another SSB" is an extraordinary reflection on the semi-State bodies. It is reflection with which I would agree. I think the justification for semi-State bodies is very doubtful. Senator Ryan, undoubtedly, will have something to say about that. I would like the Minister to say in what way it is going to be different from the other semi-State bodies. Secondly, what is wrong with the other semi-State bodies? I will tell him if he likes, but it will take too long. I would like to hear it from him, because he has put it down here himself. Thirdly what does the Minister mean by giving these chaps a hard time? Does it mean that he is going to phone them up every morning and say: "Listen, you are not making enough money, you are not doing very well." Does it mean he is going to sack them? Does it mean he is going to harass them at home?
These are all very brave words but the Minister will make the appointments. He will have to answer for them. To put down blandly that he is going to give them a hard time is not good enough. He must have real sanctions. He must set them real targets to which they must keep. If he likes he can give them incentives rather than threaten them. Perhaps he should give them incentives, options, or all sorts of different incentives to meet targets. To say simply they are going to have a tough time if they turn out to be like all these bodies run by this State is not good enough. I suggest that the answer to this is that the State should have a very close look at all the other semi-State bodies that the Minister is talking about. He has, by implication, in fact, indicted them in what he says. I am delighted to hear it. I would like to hear specifically what he intends to do rather than just giving them a very hard time. This speech, as all speeches which receive the approval of all parties, is very heavy on rhetoric but is very light on detail.
I do not want to anticipate the speech of my colleague, Senator Ryan, but I suspect that ideologically he believes that the forests of this country belong to the people of this country.