B & I Line Bill, 1990 [ Certified Money Bill ]: Committee and Final Stages.

Question proposed: "That section 1 stand part of the Bill."

Mr. Ross

I wish to apoplogise for my absence during the Second Stage which was unavoidable. I would like to ask the Minister a couple of questions regarding the Bill which to a large extent is in danger of going through here on the nod, being non-contentious and non-controversial. I fully understand why the Minister is bringing it to this House now, that apparently is a matter of urgency. What he fails to explain in his speech although he may be able to tell me this now, is first, why this Bill is so urgent and secondly, what the money is for.

It is a very neat operation to produce a Bill of this sort to the layman and say that the Government are going to purchase £6 million of equity capital. It sounds very grandiose and sensible. It sounds as if it is a Government investment in a company from which the Government will get some sort of return. My interpretation — the Minister will no doubt correct me if I am wrong — is that this money is extremely urgent and that this Bill is being introduced to bail out B & I once again from an immediate situation which is very difficult for them. Nowhere in the Minister's speech do we get that impression. The impression that we get is that the Government have made a sensible financial decision that once again they will put what is euphemistically called equity capital into an ailing company. It is no harm to remind the House that the history of B & I over the last ten to 12 years is one of total and utter disaster and that the Government injected in their own language, into the company through the acquisition of share capital from 1978 to 1988 the following amounts: In 1978 £0.841 million, in 1979 £5.449 million, in 1980 £5.5 million, in 1981 £5.6 million, in 1982 £7 million, in 1983 £6.5 million, in 1984 £6 million, in 1985 £5 million, in 1986 £20 million and in 1988 £11 million. This year we are being asked to put in another £6 million.

I can remember when the previous Minister appeared before this House with the last B & I Bill and stated that it was his hope that that would be the last time he would be asking the House for more capital. The Minister today says — he worded it very carefully — that it was not his intention to be here every year asking permission from the Seanad and the Dáil to inject more capital into the company. It is right to say that what is happening here again is that the company are in trouble and the Government are bailing them out again. It may well be — I do not want to anticipate the Minister's reply — that they are saying that this is a matter of paying debts and interest charges which have become due. I would be interested in that but that is another issue. Maybe we could deal with what I have said first.

Mr. Mooney

I wish to thank the Minister for being gracious in his remarks about my involvement in tourism. It is a question of being a chip of the old block. I could not have been other than interested in tourism having had for a father one who lived tourism all his life.

I want to put a few points to the Minister and to rebut much of what Senator Ross has said in relation to the activities of B & I. The Minister states that in 1988 and 1989 B & I returned operating profits of £1.8 million and £2.8 million respectively. I do not think that you can take the difficulties of B & I in isolation. When one compares their position with that of Sealink, their main competitor on the routes in and out of Ireland, one finds that they, too, have gone through enormous financial difficulties even with the backing of the British Government.

I referred earlier to reports in the Irish Independent newspaper, I did not raise some of the comments because they do not apply to the Bill before the House. My interpretation of the remarks by Senator Ross was that he was being derogatory towards the management and staff of B & I and disparaging of the efforts they have made in the past two years to become viable. It is important that the House should be aware that Sealink had enormous difficulties. One of the reasons the company are now in profit, according to the information supplied is that they operate the short routes where ships can make two round trips a day.

At one time Sealink were knocking B & I's Liverpool to Dublin ferry. In 1984 they said the Liverpool route had one sailing daily and that it took half the night. Sealink, I might inform Senator Ross, tried to run a service on the long Liverpool/Dún Laoghaire route but abandoned the experiment at the end of last year as it made no money. There are several other references to the trading difficulties that Sealink had on the Irish Sea. It is not fair to single out B & I. There are difficulties on the Irish Sea route and they have been there for a long time. It is important at this stage in the debate — the Minister has taken a lead on this — to highlight the positive aspects of the rationalisation programme that B & I have embarked on over the last couple of years.

I was delighted to hear the Minister refer to the fact that he has ongoing discussions with his British counterpart and that the Irish Government during its Presidency of the EC will be giving full support to any proposals that the British Government have for improving the road and rail links through Britain down to the Channel Tunnel. Could I suggest to the Minister that he might use the Irish card in his dealings with Mr. Cecil Parkinson, who very recently was quoted in the Irish Post as not only claiming to be Irish but proud to be Irish. Perhaps it might be a way of getting to a British Minister. We tend to use the Irish card in our dealings with our American cousins so it might be a pleasant change to have a British Minister, particularly in the transport area, responding not just on purely practical and cold economic grounds but maybe with a little bit of sentimentality attached.

I might also ask the Minister if there are any proposals in the context of the £6 million that is being given to B & I. Obviously, in giving such a large sum of money the Government have a stake and an input into the management policy of B & I. Will there be any more frequency of service on the Irish Sea? It seems that one of the major difficulties facing us, both as a tourist nation and as an industrial and exporting nation, is the lack of frequency of service. In my comments earlier about the diversion of trade to the Northern ports this point comes across time and time again. One of the big advantages, apart altogether from the other aspects of the reasons why people go North, is the frequency of service. If they miss one ferry they will get another one a short time afterwards and there is not a hold up in costs; whereas if one misses the ferry on the Dublin/Holyhead corridor one may have to wait up to 12 hours. In that context might I welcome both B & I and Sealink's recent investment in new shipping on the Irish Sea. I hope to have the opportunity of experiencing both of the ferries, Dublin/ Holyhead and Rosslare/Fishguard over the coming weeks. According to media reports these ferries are up to a very high standard. I am delighted that the B & I ferry is being refitted by a Dublin based company. It is providing much needed employment.

Acting Chairman

The Chair would like to point out that we are on section 1 and the Chair does not anticipate a duplication of the Second Stage debate.

Mr. Mooney

I have not repeated one thing I have said, but I take the Chair's comments on board. I would just like to complete my comments to the Minister by again asking, in the context of the £6 million given to B & I and all that implies, whether there are any plans or what steps are being taken to minimise, perhaps reduce and eliminate the diversion of trade to the Northern ports?

Minister for Tourism and Transport (Mr. S. Brennan)

Could I say, in response to Senator Ross, that I share his frustration, I am sure the company also share it. This is not a simple matter. It is a complex enough issue. The Senator will be aware of that. This is urgent because the cash is required by the company as soon as they physically can get it. It is important that it is obtained sooner rather than later. The company have scheduled debt repayments to make. They have to be met. Clearly, Government funding is required before they can be met. The urgency is tied in with the scheduling of the repayment of the debt. That is what the cash is largely being used for and that is why it is urgent.

The figures speak for themselves. In 1987 the company recorded a loss, before extraordinary items of £10.7 million. The forecast this year is a loss of something over £1 million. If that trend continues the company will be in a break even situation very soon. Since 1983 the company have recorded losses, before extraordinary items, of over £50 million and after extraordinary items of up to £100 million. It is clear that the investment from the State is required in order to fund those losses. In short the money is required to fund historic losses because the company are now coming into a situation where they can break even very shortly, hopefully this year.

That is why I have asked the company now to sit down and consider that they are half way through this programme, they have taken some very tough decisions losing half their staff, taken a pay cut of 5 per cent, taken a wage freeze for another period. A quite savage management action programme has reduced the losses from £10 million to £1 million. I thought it was appropriate that we should support them this year and immediately look at what the options are for their future. I am not sure if the Senator was here when I was responding. I said that I am looking very urgently at the future options of this company and I do not rule out any particular option in regard to the future of the company. The money is required to fund that particular history.

Mr. Ross

If Senator Mooney misinterpreted me, I apologise. It would be wrong not to recognise the great strides made by the management and the company for various reasons in moving into what is called an operating profit. If I did mislead the House I am sorry. It does not solve the problem of the £6 million. I accept the Minister's explanation but it leads on to something more serious.

I am not sure if this £6 million was anticipated in the budget or in the Exchequer returns at any stage. If it was not I would like to know why it was not anticipated. It seems to me that we are being asked to produce this money in a hurry. I would like to know why we are being asked to produce this money in a hurry. The second point which I think is the kernel of the problem — the Minister answered me but not quite fully on this — is it will actually be used to pay off some of the interest payments on the debt. First of all, if it was not anticipated we ought to know why. Secondly, it seems that the problem of the B & I debt is something this House and the Government should be honest about. I can do lots of things with figures, as can the Minister and his officials. I can talk about operating profits which sounds very good. We can talk about extraordinarily items, which is a device — not necessarily in this case — for recording different levels of profit. We will still be landed with this enormous B & I debt.

What is important here is whether the Government, by producing this £6 million basically to bail them out of interest payments which are due in a few days' time, will continue treating the B & I debt as through it is guaranteed. The Minister says "The burden of debt, however is a commercial reality with which the company has to continue to cope." It is exactly the opposite of that. If the company know that the debt which they have incurred over the last ten to 15 years will, every time the interest payments are called on be paid by the Government it is not a commercial reality for the company. It is, in fact, something they can exclude from their projections in practice because the Government will come to their rescue to pay that debt. I would prefer to have here from the Minister a pledge that B & I will in future stand on their own or a projection of how much of B & I's debt payments we will have to bail them out for in the future.

At the moment the reason we have this Bill is that the debt has arisen and the Government have once again come to their rescue. It seems to me that we have had this system in several semi-State bodies in the past. It is something which I would like to avoid in the future. What I am trying to ask the Minister is how he proposes that the debt will be treated in the future and could he give us an indication that that debt will no longer be regarded as a Government responsibility, which it obviously is here, but will be a B & I responsibility. It is quite easy to produce an operating profit if the money you have borrowed is something which the company does not have to pay back or if the interest payments do not have to be paid back. What I would like to see is the Minister giving us an indication of how this is going to be paid for in the future. We now know this £6 milion is actually being used to pay off debt, or most of it is being used to pay off debt, because there is a cash crisis in B & I once again. What I would like to know is, if there are future cash crises can they be avoided and could we have an indication from the Minister of how they will be treated.

Mr. S. Brennan

The Senator asked me was the £6 million anticipated. The precise figure was not, but some investment was anticipated because at the time of the major crisis in the company some three years ago or so the action plan that was then brought forward under a new chairman of the company was an anticipated £35 million action programme. The Government did not commit themselves to that £35 million but did indicate to the company that it should proceed with the action plan and the Government would look at the progress of that plan on the basis of having an annual look at the progress of the company. That annual look is now being taken again and the Government have concluded that we should invest or ask the Dáil and Seanad for authority to invest £6 million in the company. It was anticipated to the extent that the original estimate for bringing the company fully around over a five year period was £35 million.

The Senator has also asked me about the guarantee of the debt. The position there is that of the total debt of £37.3 million, which is the B & I debt at the end of December 1989, £16 million is covered by State guarantee. I can say crisply and frankly that it is not the Government's intention to enter into any further State guarantees in regard to borrowings of the company.

Mr. Ross

Perhaps the Minister could tell us about interest payments. Could he be more specific about the £6 million. If he cannot, I will understand. This Bill, as I understand it, just gives the Government the option to purchase £6 million. It does not have to do it. Could he be more specific about what proportion of that is going to pay off B & I's debt or interest payments when they are due and how much of that is going to be used for actually paying off the interest payments and when they are due?

Mr. S. Brennan

Almost all of the £6 million will be used for repayment of the scheduled debt — not it all, but a substantial portion of the £6 million will be.

Mr. Ross

Perhaps the Minister could tell me is B & I paying off? It is a very large payment. Is that interest or capital?

Mr. S. Brennan

It is both, but you can take it that the bulk of the £6 million, most of that money, is being used to fund scheduled repayments. That is the purpose of the £6 million. Most of it is going in that area. It is capital as well as interest.

Mr. Ross

Is B & I paying off any interest payments itself on this debt?

Mr. S. Brennan

It has ongoing interest payments of its own, but in regard to the accumulated debt the purpose of the £6 million is for capital and interest on the accumulated debt.

Mr. Ross

That is very helpful. Thank you very much. Perhaps the Minister could tell me why the Government continually take the role of investing share capital into B & I. There are all sorts of other ways of doing it. I do not know why this is preferable to perhaps guaranteeing £6 million or lending the company money. It seems to me that this is the easy option as far as the company is concerned because if £6 million in share capital, which sounds very grand but really is not, is injected into the company, the company has very little obligation to that £6 million. The future of that £6 million depends on the performance of the company. If the Government were either to guarantee a loan of £6 million or were to lend B & I the money, it would put realistic commercial pressures on B & I to pay this back within a commercially decided time. At the moment the injection of £6 million, like it or not, puts B & I under absolutely no pressure to perform well. The Government have got £100 million stuck in there already and another £6 million, which B & I are probably not overconcerned about because it is all gone, puts B & I under no pressure to perform at all. To lend it this money would be to put B & I under some pressure.

Mr. S. Brennan

The Senator lives in the commercial world. It would not make any sense to have lent up to £100 million over seven or eight years.

Mr. Ross

No, it would certainly not.

Mr. S. Brennan

It would not do the balance sheet any justice to inject on to the balance sheet loan capital. If one thought there was a realistic prospect of having it repaid then one could consider that course of action. That is not important because, if it goes in as equity and that fresh equity enables the company to be profitable and the State owns the company, then we get the profits at the end of the day anyway. It would not put any additional pressure on the company; it would only make its balance sheet look slightly more ill and that would not do the company any good. If it had consequential benefits for the Exchequer you could consider it, but it would not have any consequential effects on the Exchequer, benefits for the Exchequer, because there would not be a reasonable prospect of having a scheduled repayment on this State investment.

I have to be pragmatic about it: either we support the company through its recovery programme or we do not. I think the half way house of lending the money in the hope of getting it back, when in fact it is not realistic considering its other commitments, is a far more straightforward and in many ways more courageous approach, because you are making a crisp decision that you will support the company and therefore improve the balance sheet.

I want to correct an impression I may have given, Senator, because you are being quite specific with me and I need to be specific in response. Quite a large share of the £6 million will be in fact capital repayment. I prefer not to give the figures, but quite a large share of the £6 million will be capital repayment on the scheduled debt, some of it will be interest but a larger share than I may have given the impression will actually be capital repayment also.

Mr. Ross

Thank you. I sympathise with what the Minister says about the road they have taken to put more capital in, and it is obviously consistent with what has been done over the last 11 years. I wonder could the Minister give me an estimate of the value of the £106 million worth of shares put in the company, the equity value now of that to the Government, how much it would be worth?

Mr. S. Brennan

I do not have a commercial valuation that I can give you, Senator. If you were to take it down to your stock exchange and ask for a valuation on it, I think its commercial value on paper would depend a lot on the treatment of the historic debt. It would depend a lot on the future plans of the company in regard to replacing the ships. It would depend on the company's future plans in regard to routes. To value the company you could not just take a net asset value because that would be very small. It would be quite negligible. You would have to take into account all of those items. They are the very items about which I am waiting to hear from the company board: their plans for future vessels, for future routes and their ideas on how the historic debt could be treated. I am anxious that we bite this bullet and do our best for the company as urgently as possible, but to do that in consultation with the staff and the management because of the fact that they have taken such a savaging in the past few years commercially. The unions there particularly have been co-operative in recent years in turning the company around.

Also I think it would be silly for any Minister publicly to put a value on a company when in fact all of the options as to its future are still on the table, including the fact that the State may not continue to own all of it. That is an option which is not ruled out. Neither is it ruled out that we would hold on to the company. While it is tempting to be crisp with an answer to the Senator, it might not be fair to either the company or the Exchequer to do that. The Senator could draw his own conclusions from those comments.

Mr. Ross

Let me help the Minister and offer him a figure. I suggest that if the company were to retain its historic debt the figure would be negative rather than positive, the company would be worth a minus amount, and the Government would actually have to pay someone to take it on board. That is why the £106 million or so which has been put into the company is completely wasted public money in a commercial sense. If we could go on from there, I ask the Minister whether he would be more positive in considering privatising some of the more commercially viable areas of B & I. It does seem to me — and I say this not from an ideological point of view but from a straightforward point of view — that with the best will in the world B & I under State ownership, State direction and State nursing has been an unsuccessful company commercially, but that if there is a private company, which the Minister either hinted at or stated specifically, that was interested in taking over the company, or parts of the company, then it is a godsend to the Government that it should have such an albatross for the last 12 years removed. Seeing that the company as it is presently constituted, is worth, not nothing but minus nothing — because all that happens every year, or every two years is that those who own all the shares have to pay more money to keep owning the shares and keep the company going — the Minister might consider privatisation of the commercially successful parts as a real runner.

Maybe the Minister would be more honest — I am not accusing him of dishonesty but he might be more clinically clean — and say, "All right. Let the company go. They are making an operating profit, but the Government are going to take on the debt", because to me, in effect, that is what is happening. There may be small capital repayments, and I respect the Minister's wish not to give us the detailed figures, but the Government are paying off the company's debt. That is what is happening and that is what is going to go on happening, and we will leave it at that. The Government might even get some of their capital back in selling off the successful parts of B & I.

At the moment we appear to have the worst of both worlds. We appear to have a small operating profit and capital repayments and interest repayments being made by the Government. I think the Government would be very lucky, it would be a godsend to the Government and the people of this island if any private company was prepared to take this company on at its present value, because at its present value it is going to remain a burden on the Government.

I can see quite clearly from the trend and the figures and from what the Minister says that the Minister — God forbid, unless he is promoted — or some future Minister will be back here in two year's time, or maybe one year's time, saying "Look, the company is doing terribly well and it has now got an operating profit of XYZ but I am going to have to ask you to pay off their debt again". I do not think it is unrealistic to say that that is what is going to happen. The Minister, because he was very careful in his response, said that he does not want that to happen: but I think he realises that unless B & I perform extraordinarily well that is what is going to happen. The Seanad is going to probably, as it normally does, congratulate the management and the workforce of B & I and let it through on the nod without examining why we are paying off this vast debt and asking should we be doing so. That is what I would like the Minister to tell us: will he consider saying "OK We will sell it off and we will pay off the debt."? That is the honest approach. The Government's role in this company is actually to pick up the tab. That is what has been happening and that is what is going to happen again.

Mr. S. Brennan

You can sell any company in the country if you pick up the tab for the debt. You would know that yourself. There is no difficulty in selling companies if you march in and march off with the debt. Then every company, private or public, would be a very much more exciting prospect than it is with the debt. If you marched in and paid off the debt and then sold off some of the good routes, you would be left with the worst of all worlds.

We are getting to a situation where the company after a very sick time is coming back now to very good health. The commercial thing to do is to continue to improve the company, get it into profit and, as we have now commenced in recent weeks look very crisply at exactly what the options are. It would not be fair to all the people who have brought this about — staff reductions from 1,400 to 800, 5 per cent pay cuts, termination of the Dublin-Liverpool car ferry route, sale of the North Wall properties and a rescheduling and renegotiation of historic debt — to let some bounty hunter pick up bits and pieces of the company that, given their difficulties, have tried and done their best to serve what is, after all, a very strategic business of developing access to and from the country.

While I appreciate the Senator's sense of urgency and his requirement to move quickly and commercially on it, a much more sensible approach for the Government to take would be to look quickly now at what those options are. Those options do not exclude some of the suggestions the Senators mentioned. I have told the Dáil quite bluntly that I am not ruling out any option for the future of the company. But I am determined about one thing, and that is not to be coming back here year after year looking for State support for the company. It is most determinedly my intention not to have to go down that road, and to see an end to State subvention of this company as soon as that is physically possible.

We have also to be careful here. We did put in place an action plan some two or three years ago and we had better not lurch around with it. Hundreds of people committed themselves to that plan — staff, board, management, banks, ferry companies, harbour authorities, hundreds of people. The plan is performing better than anticipated and I want to be careful in the centre of that plan not to flap about and start calling off all the bets when in fact people committed themselves to a plan which is actually working and in which we did anticipate there would be an expense. Our best chance here of getting our money back, of stopping the subventions, is to stick it out, to study the options — and I exclude no option — and then to make mature decisions in full consultation with the staff. I intend to do that within a matter of months.

Acting Chairman

Is section 1 agreed?

Mr. Ross

I can understand your sense of urgency, Sir. I hope I will not keep you for very much longer. Maybe the Minister could indicate how the debt would be treated in the future? First of all, what I would like to elicit from him — but I presume I will not be able to — is a pledge that he will not come back in the next three, four or five years looking for more money for B & I. Having failed to elicit that, which I am anticipating in his reply, perhaps he could tell us if the Government have any projections about the B & I debt in the next five years, how much it is going to cost the Government in the next five years and what parameters will be acceptable to the Government in the next five years. It is not unreasonable that the Minister should say to us, "Next year, we anticipate that we will be paying off another £6 million". I think it is unreasonable, but it is not unreasonable that he should tell us what will be paid off the year after and in the year after that.

Perhaps the Minister could tell us also in some detail how much is acceptable to the Government or whether we really have a blank cheque again from them for B & I and that we have a blank cheque, too, so to speak, in terms of piecemeal arrivals of the Minister for Tourism and Transport here every second year or even every year asking for more money for the company. Perhaps the Minister could specifically say first, "I do not think I will be back here"— I do not expect him to promise he will not; it would be unrealistic — I do not want to be back here; but, secondly, "I do not anticipate being back here looking for more than X amount of money. If more than that amount of money is looked for, it will be unacceptable to the Government."

It is fair that that sort of pressure should be put on B & I at least. They should be told that the Government simply are not going to pay off more than so much of the debt in future years. My view is that they should not pay off any of the debt for them. That is obviously politically unacceptable to the Government. We should be told in public by the Government how much is acceptable to them. Otherwise the B & I management, who are good, honest hard working people, will still have in the back of their minds the notion that, "We are doing OK, the action plan is doing all right, the debt is a bit of a problem but we do know really what is going to happen to the debt". I know what is happening to the debt and the Minister knows what is going to happen to the debt. We know perfectly well that the debt is going to be paid off by the Government and what we need to know is how much is acceptable to the Government. Really what is happening here is that we are being told: "Sorry, chaps, we have got to pay off another £6 million but things are going very well and we hope not to be looking for any more". What I would like to know is what is acceptable in the future and what is not acceptable.

Mr. S. Brennan

There is no blank cheque for B & I or any other State company. That has been made quite clear. Secondly, there are no further State guarantees for borrowings by the company — I think I have made that clear also. Thirdly, the Senator has to face a few realities. There are loans to private financial institutions. Secondly, the Government own the company. If we own the company and the debts are to private financial institutions, then we have an obligation to meet those debts. That is not going to go away and therefore we have to meet the scheduled debt.

It is not my intention, obviously, to increase the debt, that would certainly be unacceptable. As I said in my opening remarks, by 1995 we should see the end of the debt; but that depends on a whole range of things over which we have little control, like projections on profit in regard to traffic, competition on the sea, costs of vehicles and their replacement and all of that. I would like to be definite for the Senator because I can sense from listening to him that he is keen to stop the bleeding. That is also my desired intention: to stop any bleeding that is going on. In fairness it has come down from a very substantial haemorrhage to what is now only a trickle and hopefully this year — and, if not, certainly early next year — we will see a full stopping of the bleeding. Now that we have got that far it makes sense to look at the options. A couple of years ago we had no options. It was: close the company down or try to rescue it. We decided to try to rescue it. We are substantially on the way to doing that now, so at least we now have options. Now is the right time to look, in consultation with the company, as to precisely which of those options we should go for. There are many options and I have mentioned a few already.

The historic debt is obviously an important negotiating item in dealing with the company and in dealing with those outside the company who might be interested. I did say already I had an unsolicited expression of interest from one particular privately owned ferry company. I have, in response to an informal request from the B & I, left that to one side while I hear from the board of B & I as to what their own intentions are. I think, in view of what they have been through, I should certainly give them courtesy of listening very carefully to what their intentions are. We will take the most commercial sensible option as quickly as we possibly can.

Section 2 agreed to.

Title agreed to.

Bill reported without recommendation, received for final consideration and agreed to be returned to the Dáil.

Seanad Éireann debate - Thursday, 22 Mar 1990