Sugar Bill, 1990: Second Stage.

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

Minister of State at the Department of Agriculture and Food (Mr. Kirk)

This is a very important piece of legislation, the purpose of which is to enable Siúicre Éireann c.p.t. to be partially privatised. I am satisfied that this is the only way that the company can expand and develop commercially. At the same time, the proposed legislation provides that the restructuring will be carried out in such a way that it will safeguard the continued existence of the Irish sugar industry, that the Exchequer will receive a satisfactory return on its investment, and will ensure that beet growers and employees of the company can fully benefit from its growth.

The Bill has been prepared following an in-depth examination of the future of the company. Consultants were appointed by the Government early in 1989 to carry out a detailed study of the company and to report on any restructuring or other developments considered necessary to ensure its long term commercial viability and growth. Following careful consideration of their report, the Government set up a small ad hoc group in September 1989 to examine all the options for the company's future. This group was representative of my Department, the Department of Finance, the Industrial Development Authority and Siúicre Éireann itself. The group examined three options for the future of the company.

Before commenting on these options, I would like to give you some details concerning Siúcre Éireann. The company is, as of now, a public limited company with an issued share cpaital of £66 million comprising 65.5 million ordinary shares of £1 each and 0.5 million 6 per cent cumulative preference shares of £1 each. The Minister for Finance holds all the ordinary shares save a small number of qualifying shares held by directors. The 0.5 million preference shares are held by various investors.

Its main activity, accounting for almost 50 per cent of its turnover, is the processing and distribution of sugar. It has almost 100 per cent of the market for sugar in the State, 70 per cent of the market in Northern Ireland and a small market for industrial sugar in Great Britain. The company is also involved in the food sector and in the recent past has made a number of acquisitions in this area, the most significant of which was a 50 per cent share in Odlums Ltd. with options on the purchase of the remaining 50 per cent. Agri-trading, with 24 per cent of turnover, is the principal other activity of the company, which is also involved in recently commenced joint ventures with private companies, notably in Thurles.

The company has reported net profits on ordinary activities since 1986 and had a record after-tax net profit on ordinary activities of £18.2 million in the year ending 30 September 1990 compared with £15.4 million in 1989. Extraordinary charges of £5.9 million reduced the retained profit in 1990 to £12.3 million. During the period of recovery, profits were applied in reduction of borrowings and large accumulated losses which had been incurred prior to 1986.

Turnover in the year ending September 1990 was £271 million, made up as follows: Sugar Division, £133 million; Food Division, £74 million; Agri-Trading Division, £64 million. The turnover consisted largely of Irish sales with only £46 million accounted for by sales outside the State.

In the year to 30 September 1990 the company employed 1,757 people compared to 1,556 in the previous year. This increase, the first in many years, was essentially as a result of acquisitions during the year. I am happy to report that at the end of 1990, 187 new jobs had been created in the joint venture replacement industries in Thurles and the target of 384 for the end of 1992 is very clearly realisable. I am glad to say, as regards the old Tuam sugar factory site, planning permission has been sought for the building of a 20,000 sq. ft. advance IDA factory which will bring a new industry to the area. The Sugar Company will contribute to the cost of this factory in the context of its commitment to the establishment of new industries in the area of following the closure of the sugar factory there.

The improved results have been achieved as a result of restructuring in the company and by diversification. However, apart from the excellent work of the board, management and staff, a major factor in turning the company around was the significant capital investment by the Exchequer, amounting to £59 million between 1982 and 1987. This brought the total Exchequer equity holding up to £65.5 million. There has been and continues to be a considerable cost to the State arising from the provision and servicing of these funds. No dividend has been paid because of the legal ban on any such payment until accumulated losses have been cleared. In addition, because of protracted loss-making, the company has paid little corporation tax.

Following flotation, the State will at last obtain some return for its investment. This will be achieved both through sale of shares and the payment of dividends on the residual Exchequer shareholding.

I would now like to return to the different options considered by the ad hoc group. The first option was to continue the present activities and structures of the company. On the basis of the company's excellent performance in recent years, it is expected to continue to operate profitably in the medium term. The shareholder could expect a reasonable dividend this year and for some period thereafter. However, this is not really an option as the long term growth and expansion of the company would not be ensured. The need for the company to diversify and expand its base is highlighted by possible future changes in the Community sugar regime, the outcome of the GATT negotiations and the fact that in European terms the company is a moderately-sized player in a market tending to be dominated by the large.

The second option — total privatisation of the company — was not considered as suitable. It could ensure that the Government would realise a short term Exchequer benefit on its investment in Siúicre Éireann. The company would, however, be particularly attractive to other EC companies which would anticipate maximising economies of scale and/or rationalisation. A sale on that basis could have particularly negative effects on employment and on the future of beet growing in Ireland. In addition, there would be no guarantee that any of the profits from future sugar operations would be invested in Ireland.

The restructuring of the company on the basis of partial privatisation and commercial development while retaining a degree of control over its sugar operations and the sugar quota was the final option examined by the group. They chose this option as the best one for the future of the company. They took the view that the company's commercial development should be undertaken largely by means of acquisition and/or joint venture so as to minimise the risk for Siúicre Éireann. However, they recognised that while the development of the company cannot be solely financed from internal resources or by borrowing, the Exchequer should not be required to provide additional equity capital for development purposes. Such equity should be raised by the issue of new shares on the stock market following flotation.

The Government, while recognising that partial privatisation would represent a fundamental change in the status of the company, accepted the group's recommendation. They considered that the conditions which originally existed and justified exclusive State control, no longer apply. Already Siúicre Éireann is in the top flight of agri-business entities operating within the State. I am confident that following partial privatisation, it has the requisite ability to meet the demands of investors and as a result of access to market funding will develop in time into a very substantial food company.

I acknowledge that the employees and the suppliers of raw materials to the company, in particular the beet growers, will be anxious to ascertain if the flotation will have significant implications for them. Neither group has anything to fear. On the contrary, the overall strengthening of the financial base of the company which will ensue can only be to their advantage. Indeed, it is the Government's intention that beet growers and employees will be asked to subscribe for shares in the new holding company and this is, I believe, an imporant development. These groups, as shareholders, will have an active interest in the company and benefit from its development by way of expected dividends and capital appreciation of their holdings.

Concern had been expressed regarding the rights of employees following flotation. The position is that workers' interests are protected under the European Communities (Safeguarding of Employees' Rights on Transfer of Undertaking) Regulations, 1980. However, in order to further re-assure workers on this point the Minister for Agriculture and Food has inserted, by way of amendment on Committee Stage in the Dáil, section 6 in the Sugar Bill, 1990, which underlines the rights of employees. This specifically provides that the rights which employees of Siúicre Éireann, or its subsidiaries, hold before the date on which the Minister for Finance transfers his shares in Siúicre Éireann to the new holding company will continue to be held by them on that transfer date. Provision has also been made to ensure that employees will not suffer any less favourable terms under their pension or superannuation schemes on that transfer date.

In addition, I am pleased to see that a Siúicre Éireann/Union agreement has been drawn up and lodged with the Labour Relations Commission and registered with the Labour Court. This agreement relates, inter alia, to employees' conditions, pay, continuity of employment, recognition of trade unions and continuation of existing procedures. I fully endorse the contents of this agreement which I have no doubt will constitute the major protection for the rights of employees.

I now turn to the particular provisions of the Bill. Section 1 is the standard definitions section and requires no specific comment. Section 2 allows the Minister for Finance to exchange his shares in Siúicre Éireann for shares in the new holding company, which will be called "Greencore plc". It also enables the Minister for Finance to acquire further shares in the holding company with the required funds being advanced from the Central Fund. He may also, following consultation with the Minister for Agriculture and Food sell or dispose of shares in the holding company as he sees fit. Funds received in respect of share sales and dividends must be paid into or disposed of for the benefit of the Exchequer.

This section also allows the Minister for Agriculture and Food to acquire a special share, which he may not dispose of, in the holding company. This share is analogous to the "Golden Share" issued in privatisations in other European countries in recent years, notably in the UK and France. The purpose of the special share is to ensure that the State can effectively exercise certain specified control over the sugar operations of the company while reducing its own shareholding below 50 per cent.

The special share is designed principally to ensure that none of the following events can arise without the prior consent in writing of the special shareholder: any change in certain specified articles in the articles of association of the company; the winding up of the company, the sale of more than 49 per cent of Siúicre Éireann which, following the Stock Exchange flotation, will be a subsidiary of the holding company; the disposal of specified sugar assets including the Irish sugar quota held by Siúicre Éireann; the creation of a new class of shares in the company; the building up by one shareholder or a consortium of shareholders, other than the Minister for Finance, or more than a 15 per cent shareholding in the company after flotation. These points are dealt with in some detail in the Articles of Association of the holding company.

I should mention at this stage that it is the intention of the Government that the Minister for Finance will only dispose of sufficient shares on flotation to bring his holding down to 45 per cent.

To sum up, the special share is a device to (i) prevent the disposal of the controlling interest in Siúicre Éireann or the sugar assets; and (ii) prevent a shareholder or group of shareholders acting together from gaining control of the holding company.

I should add that it was as a result of discussions with the Irish Congress of Trade Unions and representatives of the beet growers, that I specifically included in the Bill a provision that the special share, which I have already referred to, may not be sold.

A further provision in section 2 which I should mention is that enabling the Minister for Finance following consultations with the Minister for Agriculture and Food to sell or dispose of his shares to such specified persons and on such terms and conditions as he may prescribe by regulation. The intention of this section is to facilitate the sale of shares to employees and beet growers — the Minister for Finance will dispose of some of his shareholding to these groups.

Section 3 provides that the two ministerial shareholders may exercise, including by attorney or proxy where applicable, all their rights attaching to their shares in the holding company. Section 4 deals with the allotment of shares and empowers the two ministerial shareholders to appoint nominees and to transfer shares to such nominees to act on their behalf. It sets out the rights and duties of nominees and the power of the Minister to issue directions. Section 5 grants relief from stamp duty on any agreement, transfer, conveyance, assignment or lease whereby any business, assets or liabilities of Siúicre Éireann, or shares held in or by it, are transferred to the holding company. This relief is a common feature of group reconstructions.

Section 6 provides that the rights — including pension rights — of employees of Siúicre Éireann or its subsidiaries enjoyed by those employees before the transfer date will continue to be enjoyed by them on that transfer date. Section 7 provides for the repeal of the Sugar Manufacture Acts.

Section 8 is a standard provision relating to any expenses arising under the Act. Section 9 is another standard provision and deals with the laying of regulations before the Houses of the Oireachtas. The section provides that regulations made under the Act shall be laid before each House of the Oireachtas as soon as may be after they are made and may be annulled by either House within 21 sitting days. Section 10 contains the usual citation and commencement provisions. The Act will come into operation on such day or days as the Minister for Finance may determine following consultation with the Minister for Agriculture and Food.

As I stated at the beginning, this is a very significant legislative measure which will be welcomed by all of us who wish to see the development of a major, Irish-based food company, which will be able to compete and expand in the European Single Market. I will be happy to respond to any particular queries in my reply to the debate.

I commend the Bill to the House.

Professor Raftery

I begin by welcoming this Bill. For too long in this country we have had too much socialism on the one hand, too much capitalism on the other hand, and not enough realism. Realism is beginning to set in, and it is a good thing too. Fortunately, one of the latest converts to realism is the Taoiseach. This Bill is a far cry from the stance which he took about four or five years ago when he was Leader of the Opposition and when he was opposed to any form of privatisation. It is a pity he is so late coming around to it because we lost a lot of time, wasted a lot of money and opportunities went abegging. I refer to his stance, which was expressed in a letter to Peter Cassells back in 1987, on 20 January 1987. In it he says:

As you will be well aware, the record of Fianna Fáil, whether in Government or Opposition, has been one of consistent support——

An Leas-Chathaoirleach

Will the Senator give the reference, or is he quoting from the Official Report?

Professor Raftery

I can give the reference. It is a letter to Mr. Peter Cassells, dated 20 January 1987.

Professor Conroy

With respect, is this a private letter? Is this document available publicly?

Professor Raftery

The document is available.

Professor Conroy

Where is it available publicly?

Professor Raftery

I will let the Senator have the information when I can go back to my notes.

An Leas-Chathaoirleach

Will the Senator give the date of the document and its status?

Professor Raftery

It had already been quoted in the debate in the other House. I will quote from the letter, if I may start again without interruption:

As you will be well aware, the record of Fianna Fáil, whether in Government or Opposition, has been one of consistent support for our state bodies, most of which were created under Fianna Fáil Governments.

I have on many occasions made my views known on privatisation. For example, in the Adjournment debate of 14 December 1984, I stated: "To close down, sell off or devalue a State company seems to have been turned to by the economists and other spokesmen of the New Right as a demonstration of political virility... If this process of dismantling the State sector is brought much further, the Government [the former Coalition Government] will get to the point of dismantling the State itself". But I can assure you that Fianna Fáil have no intention of privatising established State bodies...

I welcome the change but it is a bit late in the day and opportunities have been lost. The company should and could be much further down the road now and we could have been selling at a better time; but better late then never.

It was necessary to do something about this company. It was losing money heavily up to the mid-eighties. I played my own part in suggesting at an early stage, at a talk in Salthill, Galway, that the Tuam factory should be closed. My argument then was roundly denounced by the Deputies and Senators present, and indeed almost every other politician west of the Shannon. My argument was simple. We either would have fewer beet factories or no beet factory. The message eventually got to the politicians who were against it and Tuam was eventually closed.

The Government changed and there was a question of two factories rather than three factories. The present Minister for Agriculture was not the slightest bit interested in it; in fact, he was quite unhappy about that suggestion. In his literature distributed before the 1987 election he made it quite clear where he stood on the issue. The document which he circulated talked of the Government closing Thurles and of Fianna Fáil development for the Sugar Company. It went on to state that the Coalition Government — the Coalition Government of that time under the then Taoiseach, Deputy Garret FitzGerald — and the board of Comhlucht Siúicre Éireann talked of closing down the Thurles sugar factory. The document urges people to change the Government so that Fianna Fáil could change the board. In the meantime the document states: "Fianna Fáil will insist that the present board review their so-called two factory plan". Whatever about changing the board, fortunately the chairman and the chief executive were not changed. The plan went on and fortunately the Taoiseach — who is, as I said, a recent convert to fiscal rectitude and good management — disagreed with the Minister for Agriculture. We now have two factories instead of three and we now have turned the State-owned company from a heavy loss maker to a situation last year where it had a significant profit.

One might well ask the question, if it is now so healthy why are we privatising it? It is necessary, facing into 1992, for the company to expand its base and to prepare itself for the competition after 1992. It is only right that taxpayers should not be expected to put up that money. When the company was in serious trouble the taxpayers already contributed £59 million in equity, which actually took the company out of that serious trouble. I would not agree we should have gone back, as many people said to the taxpayers expecting them to cough up again to prepare the company to do better things, to expand its operations and to prepare for 1992.

Therefore, this plan of privatisation — the Government do not like to call it privatisation, but it is privatisation — was brought forward. I agree with it. It will enable the company to make the acquisitions it wants to make and to make the modernisation it wants to make. I have every confidence that under the present chairman and chief executive it will be a first rate company because their performance since they took over in the mid-eighties has been first class.

I am particularly happy to note that in the Bill there is provision for workers and farmers to become shareholders and, above all, I am happy that an amicable agreement was reached between the workers and the company and that the Labour Relations Commission was involved in it also. In that document the agreement provides for no interruption in continuity of employment. Current rates of pay and conditions of employment will continue to apply. The company will continue to recognise the existing trade unions and existing procedures for determining rates of pay and conditions of employment will continue to apply. The current redundancy terms being paid by the company are those which emanated from the 1981 conciliation conferences. The company acknowledges that this is the current position and it has no plans to change these terms. Privatisation will not give rise to changes in continuity of employment in subsidiary companies or to existing procedures for determining rates of pay or conditions of employment in those companies.

The final paragraph states:

Within 30 days of vesting day, moneys to be transferred into the manual pension scheme to cover pre-1984 pensions are determined by the scheme's actuary. Pre-1984 service in the manual scheme will be funded on a phased basis over a five year period from 1981 in accordance with the advice of the scheme's actuary. This agreement will be registered with the Labour Court under section 27 of the 1946 Industrial Relations Act.

I am very happy about that amicable agreement that was reached with the workers and I am even more happy that, in addition to that, there is provision for having workers participation in the shareholding of the company. I was sorry, therefore, to read in the Dáil Official Report such vehement opposition from certain sections of the Left towards this Bill.

With regard to the shareholding — I want to say something later on about workers' representation on the board — it is very fortunate that the company decided to allow £250 worth of shares without payment per worker. Had that not been there, workers might be reluctant to get involved in shareholding; but that is a temptation for them and I hope they will invest some of their own money also. Unfortunately, there will be some income tax consequences as the receipt of shares will be classified as an emolument of employment. That matter will have to be taken up with the Revenue Commissioners. It is not a fault in the Bill.

I regret that there will be taxation consequences for the workers arising from the £250 worth of shares. In addition to the gift of £250 worth of shares there will be discounted shares. Four per cent of current shares will be reserved for workers and a number of shares will also be provisionally reserved at approximately 20 per cent discount on the full price. This is a progressive step. It has long been my ambition to see companies — some of them like Kerry Co-op have already gone down that road — encouraging their workers to invest in the company and participate in the profits. There is also a scheme for farmers to invest. I should add that in addition to the discount on the shares the company has, as the Minister said, a holding company, Greencore, which will introduce a financing scheme to offer loans to workers who wish to purchase shares in the company.

For farmers, things are not quite as generous and I suppose that is only right. There is no gift of £250 per head but for qualifying beet growers there is a provision for 20 per cent discount on shares. A certain proportion of shares are set aside for that and they can avail of excess shares also. This will provide for the interests of growers and workers as well as other shareholders in the company. It is a progressive step which I highly commend.

The Minister has said that the Government or the Minister for Finance will hold a 45 per cent golden share and this will help to protect our national sugar quota. That is only right because we could well have a raider like the Giardini di Ferucci organisation, the biggest manufacturer of sugar in the Community. He is looking for quotas and could buy out our company, take the quota out of the country and manufacture the sugar elsewhere. I am not a legal eagle but I am sure some legal eagles will try to find a loophole in that clause in years to come. I sincerely hope they will not be able to find a way around the golden share and take the quota away from us.

With regard to worker representation on the board, I am not exactly sure how that is going to work out. Provision is being made for some kind of representation. The workers would like to put one of their own members on the board. That is admirable in its own way but one can imagine the tremendous pressure a worker on the board would be under from his colleagues in the work-place. It might be more prudent to have workers represented by some member of the professional staff in their trade union who would not only have more experience of dealing with these matters but also would be less subject to pressure from working colleagues.

I gather there is great urgency about getting this Bill through to allow the matter to go to the share market in April. I reiterate how pleased I am that the Government have changed their mind on these issues, have come forward with this progressive idea and have brought this Bill forward quickly. I look forward to its speedy passage through this House. I wish the new company every success and, above all, I hope that workers continue to increase their shares in the company and, hopefully, their profits. I wish this Bill well. We will be supporting it on this side of the House.

Mr. Hussey

Like Senator Raftery, I welcome the Bill. Regardless of whether the Government have changed their mind on privatisation, it is important now in view of the circumstances obtaining that this line of action be taken. We all know that Governments change their minds from time to time and they have every right to do so because they are the people who are in charge and they have to make up their minds according to the conditions prevailing at the time.

This Bill will remove the exclusive State control of the company and will allow them develop in a way which will be most beneficial to themselves, the State, the employees and suppliers. It is being done in a way that will guard the sugar industry and, at the same time, give a reasonable return to the State on its investment.

The Sugar Company have made a major contribution to the economic life of this country and have been a major source of employment particularly where their factories were located. The value of sugar extracted from beet amounted to £6.5 million last year and 1,757 people are employed in the company. Some 187 new jobs were created in 1990 and the target for 1992 is 384.

The company have been making progress in recent years. The improved financial position has been brought about by the significant capital investment by the Exchequer and by the good work of the board, the management and the staff. Since 1982 a considerable amount of money has been invested in the company. In 1982 £30 million was invested, in 1983, £20 million and in 1987, £9 million. This was a major injection which brought the total equity holding up to £65.5 million, a considerable sum. Profits for the year ending 30 September 1990 amounted to £26.7 million compared to £21.1 million the previous year. One can see that much good work has been done.

I remember some years ago being in very close contact with the Sugar Company because of the situation in Tuam. Senator Raftery referred to this in his opening remarks.

Every year we approached the Sugar Company to try to save the factory in Tuam and we were told that the factory was costing the Sugar Company about £4 million every year. They said they were losing money and could not afford to maintain that factory there. It is great to see that at last they have got their act together and are making a profit. Projections for the next couple of years show an increase in employment in the region of 384. That is very good.

When the factories were built many years ago in the Lemass era things were very different from what they are today. Factories were located in poor areas, not just for economic reasons but, especially in the case of Tuam, for social reasons as well. They did a very good job. Tuam's association with the Sugar Company has been a rather sad one because it started off with great hope and provided a valuable source of income for many small farmers in the western region, in the late thirties, forties and fifties and right up to the eighties when it closed down. I have memories — not very happy ones because it was not a very nice job — of thinning beet after coming home from school, with my brothers and sisters. That was common in rural Ireland at that time and in the Tuam area because machinery was scarce and the work had to be done by hand. The factory gave great encouragement and support to all the small farmers in that area and it gave valuable employment. There was a time when it employed 700 people. In the harvest season it provided part-time employment to local small farmers who were beet growers and who got seasonal work in the factory. That was great for them and for business people because there was quite a substantial amount of money in circulation.

However, things started to go wrong and it is hard to know where to lay the blame. There was great support for the factory. Farmers stopped growing beet and the acreage started to fall. That sounded the death-knell of the factory. At that time also Gowla Farm was very much in focus. Grass meal was produced there and it was one of the first in the country. It gave employment as well. That ceased just when feeding meal to cattle was coming more into play. If that had been maintained, maybe there would have been a future for it. I believe it went at the wrong time and along with it went jobs.

The factory closed in Tuam and with it went the hopes and aspirations of people. Nothing has replaced it and this is sad as far as I and the people of that area are concerned. Not one extra job has been created in that area since. The Sugar Company gave commitments to Tuam. They promised to invest £2 million in Tuam to replace the factory. They are involved in the building of a 20,000 sq. ft. advance factory and I hope that will encourage some industry to set up there. I hope the Sugar Company will honour their commitment and pay the balance of the £2 million. It is badly needed at present. However, the advance factory is not the total answer as it will be rather difficult to get industry to locate there.

The same happened in Thurles although they fared better than Tuam. They did not have the same social problems. They got a replacement industry and were not as badly affected as Tuam.

The Minister mentioned the turnover of the Sugar Company. In 1990, it was £271 million. The sugar division was worth £133 million; the fruit division, £74 million; the agri-trading division, £64 million; and £46.6 million for sales outside the State. I hope the new company will improve on this.

The interests of the growers and workers are also very important. Concern has been expressed about the rights of the employees following the flotation. The workers have every right to feel uneasy but the guarantees given by the Minister will look after the interests of the workers. The workers' interests are protected under the European Community (Safeguarding of Employees' Rights on Transfer of Undertaking) Regulations, 1990. The Minister has strengthened that further and has reassured the workers on this point by inserting, by way of amendment on Committee Stage in the Dáil, section 6 which underlines the rights of employees. This is very important.

Employees cannot be blamed for looking for guarantees. This section specifically provides that the rights which employees of Siúicre Éireann or its subsidiaries held before the date on which the Minister for Finance transfers his shares in Siúicre Éireann to the new holding company will continue to be held by them on that transfer date. Provision has also been made to ensure that employees will not suffer any less favourable terms under their pension or superannuation scheme on that transfer date. That is a very important guarantee and it should ease the worries of employees.

The golden share is very important. The special share is really a device to prevent the disposal of the controlling interest in Siúicre Éireann or the sugar assets and prevent a shareholder or group of shareholders acting together gaining control of the holding company. It is important that the Minister still has control and, although the company is being privatised, he still has a say in the disposal of shares and so on.

By and large, the fears expressed by the growers, workers and the members of the board are taken care of in the Bill. I am very happy with it. I hope this company which has done so much to improve the living standards of people in rural Ireland will develop still further under this Bill. There is a market to be exploited. I am sure the company will diversify into the production of vegetables and so on. I wish them every success in this new venture. It is great to see that after all the years of bad debts, they are now getting their act together and can look forward to the future with confidence in their ability to gain new markets and create further jobs.

Mr. Ross

Normally, I would be instinctively in favour of a measure of this sort for reasons which, if I am honest, would be ideological rather than practical. This Bill and the way it is being approached by the Government are abso-lutelly unacceptable. What is behind this Bill is confused thinking, camouflage, obfuscation and a lack of information which is an insult to both Houses of the Oireachtas. The Minister's speech, as often happens, bears a very close relationship to the speech made on Second Stage in the Dáil by the Minister, Deputy O'Kennedy, and is only distinguished by the lack of information it gives about the privatisation of Irish Sugar. The vital questions are not answered in the Minister's speech and were not answered in the other House. The most important question about the privatisation of Irish Sugar is how much is it worth? How much do the Exchequer expect to get from the privatisation and how much is acceptable to the Exchequer? Nowhere is that mentioned and no indication of price was given in the Minister's speech.

The Minister did not give one convincing reason why Irish Sugar should be privatised. The problem that the Government have on this issue is that their commitment to privatisation is purely piecemeal. Fianna Fáil have always had ideological difficulties because they have no ideology. Their problem is that a few years ago they set their face against privatisation and now, in Government, they are in favour of selective privatisation. The party are not ideologically committed to privatisation. The party, as on so many other issues, are pragmatically committed to privatisation.

What the Government are doing is disreputable. They are picking out one or two companies and deciding to sell them. There are not very many companies that can float on the stock market. Irish Sugar is one of them and Irish Life is undoubtedly another. There were efforts in the recent past to sell ICC. They were totally unsuccessful.

We have never been given a good reason why these companies are being prepared for privatisation and why others are not. The reason is quite simple — it is totally opportunist — they are selling whatever companies they can sell and the rest of the semi-State sector can stew. It would have been far more honest and acceptable if, after six months in Government, they came forward and said they had changed their minds about privatisation and would prepare the semi-State sector for privatisation because they believe it was an acceptable policy.

There are very few companies which are suitable for privatisation and for which they can raise the money on the market. They have decided to put their hands in the semi-State till and run with whatever money they can get. It is unacceptable that we have not been given any estimate of the company's worth. Will they say they are selling it at the market price regardless of what it is worth? They are very lucky, and it is not to the credit of the Government, that the stock market has taken off since 25 January and they will get more money. It was quite obvious that this Bill would go through willy-nilly regardless of that. If the stock market had not taken off the company would have been sold at a knock-down price. The same would have applied to Irish Life. That is not an acceptable privatisation policy. It is piecemeal, opportunistic and not in the interests of the taxpayer.

We have a real problem here. What is in the interests of the taxpayer is not in the interests of the Government. It is in the short term interest of this Government to get as much money as possible into the coffers. Taxpayers will suffer if Irish Life or Irish Sugar are sold at a knock-down price but the taxpayer does not know that and certainly the taxpayer does not know what the company is worth. It is unacceptable for the Minister to ask us to support a measure of this kind without giving that sort of detail. There is no strategic privatisation policy. No indication has been given of what other companies will be privatised. No preparation has been made for privatisation in the semi-State sector unlike the UK. For those reasons I do not intend supporting this Bill, although in normal circumstances I might be in favour of doing so. It is insulting to the House to produce such a Bill without this detail.

We do not know what will be done with the money after privatisation. Different signals have been given to us by the Government. It is not good enough to pass this Bill when we do not know how much we will get or what we will do with it. The Minister did not outline any long term strategy nor did he say why the Government changed their minds on privatisation in the time between being the Opposition and being in Government. What extraordinary event happened that brought about this conversion to what are Thatcherite economics or Reganomics, as they were known? Did the Government change their ideology in terms of privatisation? If they did, well and good, but let us hear that they have decided that privatisation is an economical and profitable way of earning money.

Do the Government believe that privatised companies are more efficient? Do they believe that privatised companies give more employment or less employment? There are varying views on that and they are not the traditional ones. Is it simply — I lean towards this point of view — that privatisation became an acceptable fashionable fad in the western world sometime between 1981 and 1988 and while Fianna Fáil in Opposition did not believe in it when they took office they saw it as a very useful form of revenue? Did they decide that since it had become fashionable and trendy they could do it and would not have to take too much political flak because it was done throughout Europe, in the United States and, in particular, in the United Kingdom?

I do not think the Government went through any of those thought processes. In fact, I do not think they went through any thought processes at all. It is quite simple. They saw one or two valuable companies in the semi-State sector and they simply decided to sell them in order to raise as much money as possible, as quickly as possible and put in their own coffers. That is the unfortunate reality of what is happening today. It is not an ideological commitment to privatisation because if it were the rest of the semi-State sector would be preparing, as was the case in the UK, for privatisation. Unprofitable companies would be turned into profitable companies by the Government. There is no indication of such a strategy. There is simply an indication that they want to sell off whatever good companies they have.

I think it is appropriate, having mentioned that, to ask the Minister's view of the Oireachtas Joint Committee on Semi-State Bodies. I have been a member of that body for some years and it seems absurd that the Government did not ask that body to do a report on Irish Sugar and Irish Life and to suggest the preparation that should be made for privatisation and whether privatisation would be appropriate in these cases. It should then have considered that report and we would have had a full Dáil and Seanad debate on it. That committee has been sitting for many years, reporting regularly on semi-State companies, including Irish Life and not a single report, to my memory, has ever been debated in the Dáil.

I do not know how many of the recommendations of that committee have been adopted by the companies concerned but I suggest they are very few. The reality is that the semi-State sector is a neglected sector which stumbles along on its own until it needs rescuing by the Government or is eventually privatised if it is making money. A serious strategy is necessary for that sector, a strategy which would indicate the Government's commitment and ideological belief regarding that sector.

The Government may believe that wider share ownership, for instance, is of great benefit to the companies, and this was one of the great Thatcherite reasons for wholesale privatisation in the United Kingdom. It is not a belief which I share but I would like to know whether the Government share it. If so, let them say so; if they believe that wider share ownership is a good reason for privatisation, let them say so. It is insulting to have a Bill of this sort put before us without good reasons. What is happening within the semi-State sector in these two cases of privatisation is of historic interest. It makes one suspicious that no good reasons exist for this proposal, but that it is motivated by bad reasons connected with Government opportunism.

Maybe what the Minister could consider as a result of this debate is that more issues of this sort might be referred to the Oireachtas Joint Committee on State-Sponsored Bodies or the Minister should consider abolishing that committee which takes up an enormous amount of the time of Members of this House and of the other House; it presumably costs the State a lot of money and nobody appears to take any notice of its reports.

I would like to say a few words about the golden share. I think what we have to realise about this privatisation proposal is that it is not a case for wholesale privatisation at all. This is a sort of half-way house. What the Minister is introducing is what he calls partial privatisation which only indicates his lack of commitment to the ideology in question and reveals halfheartedness and lack of conviction. The Minister wants to have it both ways by retaining the golden share; he wants to present Irish Sugar as a fully privatised company competing on the stock market with other companies for investors funds while he retains 45 per cent initially, together with such extraordinary powers that the company will trade with its hands behind its back.

Irish Sugar will not be competing in the market place either domestically or internationally on equal terms with other companies or on a level playing field because the golden share retention, despite the protection it gives to employees, will restrict the company's freedom of movement and freedom to trade. It restricts the company's right to dispose of certain specified assests. It obviously protects the sugar quota but it inflicts very serious restrictions on shareholding. It means that nobody can buy more than a 49 per cent shareholding which will obviously prevent a takeover, but it also restricts a holding of 15 per cent or more. What this is going to do is ensure that the price this company gets in the market is going to be a lot lower than it would otherwise have been. It is difficult to estimate what this company is worth because many factors go into that particular equation.

The golden share will guarantee a heavy discount on the market for this company. It should be noted by the Minister that the golden share measure was discarded in the UK as not being to the benefit of the launch of a company flotation. Irish Sugar may be the first of many privatisations; we do not know how many, as the Minister has given us no information on it. It is coming before the privatisation of Irish Life so it is probably going to go cheaply to ensure that the bigger Irish Life flotation will be more successful in raising money for the Government. As a result of this, and as a result of the golden share factor, I suggest that Irish Sugar is going to go for a song, and for much less than it ought to go. What the Minister ought to have done, and I hope he will do so on Committee Stage, is to have given us a clear indication of the pricing policy and the detailed method of flotation which he intends using when this company comes on the market.

There is a real danger that Irish Sugar will be sold at a knock-down price unless a commitment is made by the Government to a minimum value. They are very keen that it should be attractive to institutions who will also then be well conditioned towards Irish privatisation but these institutions are very sophisticated investors who will not be interested in paying above the odds for a company which is only semi-privatised and in which the Minister retains a golden share.

There is other information to which this House is fully entitled which has not been given by the Minister. Neither was this information given in the Dáil. We are entitled to know the sort of transaction costs we can expect on this flotation. We are entitled to know what advisers and legal fees will amount to, together with merchant bank fees, stock brokers' fees and consultants fees. How many people are being employed to advise the Government on this issue? These fees will comprise a very heavy percentage of the actual flotation price. In Britain Mr. Paul Sweeney, who wrote a book on privatisation entitled The Politics of Public Enterprise and Privatisation estimated that out of £30 billion raised from privatisation £8 billion has already been given away through bad pricing policy, high launching fees and high transaction costs. It is very possible that we will make an awful mess of the launch of this company to the detriment of the taxpayer because we have been given no information as to how it is going to be done.

If pricing policy is wrong we will see a sensational rise in the share price on day one. That will be wonderful for those who invest in this company and we have seen varying degrees of premium for investors in the United Kingdom, ranging up to 78 per cent in some cases within a few days. That is wonderful for the few people who get shares in an oversubscribed flotation but it is very expensive for the taxpayer. Even this week the flotation of a company on the British market ended the first day with a premium of 36 per cent. That is an appalling reflection on the pricing policy of the Government's advisers there and I hope the Minister can reassure us that the Government here are taking measures to see that a substantial premium is not given on day one. If it is he will be happy because he will take his money and run; the investors will be happy but the taxpayer will have been robbed of a large amount of money — maybe up to 25 per cent of what the company is worth — and will not know it.

This Bill is unacceptable because of the lack of strategy on the semi-State sector, the lack of Government commitment to privatisation, the lack of information on what price is acceptable and on where the money is going. I would like to know if the Government are ideologically committed to privatisation and whether they believe now that it is a good thing for industry as a whole to be privatised. They did not believe this pre-1987. I would like to hear the plans for the future of the semi-State sector and to know what companies are being prepared for privatisation. I would like to see what calculation the Government have made on this issue and in particular on Irish Sugar regarding the benefits sacrificed on the future flow of dividends against the capital it is going to receive from this flotation. I do not believe any of those calculations have been made because if they had we would be entitled to hear them from the Government. Instead, we get a generally insulting speech from the Minister because of its lack of commitment and lack of information.

On the employment issue, I would like to know the Government's view about privatisation. Do they believe that privatisation tends to reduce employment or to increase it, because I would suggest that Mr. Sweeney fairly conclusively proves in his book that privatised companies and public centre enterprises defy conventional wisdom on this issue. In Britain the number of jobs in public centre enterprises from 1979 to 1988 decreased from one million to 669,871 whereas employment in privatised companies was just about the same, taking exactly the same companies from 1979 to 1988. Employment actually went up a little so the conventional wisdom that privatisation is dangerous to employment does not seem to be borne out by those figures. The conventional wisdom that the semi-State body protects employment does not seem to be borne out either because some areas of the semi-State sector are so inefficient and so badly run that in order to survive they have to reduce employment piecemeal. It is important that the Government should tell us their thinking on this issue and particularly on the issue of jobs.

It is no comfort to the workers in B & I or in Irish Shipping to tell them that their jobs are protected because they are in the semi-State sector. That is not the case. The figures suggest their jobs are more at risk because the semi-State sector is less efficient and is involved in crisis after crisis which necessitate emegency measures on the part of the Government and which sometimes involve sudden losses of jobs.

I am not convinced that the Government's commitment to privatisation is total or that they have looked at or made calculations about the alternatives. If Irish Sugar have the bright future which everybody says did the Government not consider putting in the necessary equity? I do not suggest that is necessarily the right solution but it is a suggestion which the Government should have considered. If the company has a bright future, if it will float well on the Stock Exchange, and if the Government do not have an ideological commitment to privatisation, the logical thing for them to do would be to put the necessary equity into Irish Sugar because in that way they would get a return on their equity.

We hear what a wonderful company it is and what tremendous room there is for expansion and what a great future it has. As an ordinary investor I would invest in a company which had a wonderful future and which was looking for equity if I had the money which undoubtedly the Government has got. I would certainly put the money in but I do not believe the Government have considered this option. I believe the conclusion was come to a long time before the consultants' reported and that the Government decided that this would be a convenient form of capital revenue. Having made the initial decision that they would take money out of Irish Life and Irish Sugar they came up with what are, basically, bogus reasons for the sale of these companies.

I think it is inadequate for the Minister to come before this House to give us piecemeal reasons for the privatisation of Irish Sugar. It would be more honest to have been given a full explanation by the Government as to their attitude to privatisation as a general principle. We would like detailed figures on Irish Sugar and information on how the Government and the taxpayer are going to benefit. If we do not get that sort of information from the Minister in his reply, I certainly will be opposing this Bill.

Mr. Dardis

I begin by welcoming the Minister, Deputy Smith, here this afternoon. We have had Deputy Kirk with us for the past two days and I am sure he is glad to have a break.

May I begin by saying that the Progressive Democrats welcome this legislation. My party and I hope that this privatisation will be the first of several. Senator Ross said that there did not appear to be an ideological commitment. I can reassure him that from the point of view of at least one of the partners that there is such a commitment. We believe that where the State can disengage from activities which could more appropriately be carried out within the private sector to the benefit of the community that that is what should be done. My party do not have any ideological problems about that.

Mr. Ross

I accept that. I was not referring specifically to the Senator's party.

Mr. Dardis

It is very pleasant to have an apology from Senator Ross; this is a whole new experience for me.

Mr. Kirk

You are having it both ways.

Mr. Dardis

There is a serious strategy involved here. The State has invested over £65 million in the Sugar Company over the years. That money was well invested. The Sugar Company has a very creditable record. However, the State is entitled to recover its investment from a company of this nature which should be run as a commercial activity. There are historical reasons why the company was structured as it was. Obviously, in the early days of the State, the capital was not available within the country to go along the private road. The State had to intervene to establish such industries.

Comhlucht Súicre Éireann, Teo. and the ESB are very notable successes in the early history of the State in relation to State engagement in establishing companies which acted for the benefit of the people. Now we have a totally different situation where vast flows of capital can cross frontiers, where there is capital within and outside the country looking for a profitable home where money can be invested well, where it is secure and where it will yield a return. That is why it is appropriate at this juncture in our history that a privatisation of this nature should take place. The Minister stressed that it is a partial privatisation, not a complete privatisation, and that there are mechanisms incorporated in the Bill to protect both the grower and the worker. These must constitute priorities in the running of an efficient, commercial, profitable operation. Certain national interests are involved and these should be and are protected in the Bill. I do believe that Senator Ross did want it both ways; on the one hand, he wanted full privatisation but on the other hand he did not want a Thatcherite type of situation. He wanted meaningful jobs which he felt the private sector could create. I became totally confused as to whether he was in favour of full privatisation, partial privatisation or no privatisation.

I will go back to what the ad hoc group of consultants said when they referred in their report to the Sugar Company. They said, that the company could not remain static if long term commercial viability and growth were to be ensured. I would subscribe fully to the diagnosis that unless the company were put into a situation where it could expand and become competitive domestically and internationally, its long term time viability would be very much at risk. Certainly there were signs that it might not have long term commercial viability when we saw what happened to Thurles and to Tuam. Would Carlow or Mallow have collapsed next and would we eventually have no sugar beet industry, losing the valuable contribution it makes to farming and to the economy? It was essential to put the Sugar Company on a sound, commercial, business-like footing. I believe that the Government who invested money in the company are entitled, as any other investor is, to a return on their investment.

The Minister of State will be aware from the Department of Industry and Commerce review, where it refers to the food industry, that business will need a turnover of about £1,000 million a year, ideally, to be competitive within the new international situation. Here we have a company with a turnover of £270 million. It is quite obvious that if the Sugar Company is to become a competitive player on this level playing pitch it is going to have to diversify, invest outside its core activities and must be given the opportunity through the market to do so. If it requires equity to carry out acquisition or expansion it can go to the market, seek those funds and if it is a well run company it will obtain those funds. Considering the difficulties which farming will encounter during the next few years in the CAP reform, under the GTT, even under the proposals that are before us this year, we will need companies within the food sector who can stand up and be counted in Europe and who can contribute positively to the national economy.

Questions were asked about the use of the money. Senator Ross was being a little bit disingenuous when he said that he did not know what the figure as to the market capitalisation of the company might be. I think he has a reasonable idea of what it might be.

Mr. Ross

Very different from what it was a few weeks ago.

Mr. Dardis

If we assume that the Government are going to get £70 million or £80 million out of this flotation, then that £70 million or £80 million must be put to good use. It must be put towards reducing debt or to capital expenditure and not towards day-to-day expenditure. I know that the Government are quite determined that that will be the case. Otherwise privatisation will not make any significant contribution to the welfare of the State.

I have some questions as to why 45 per cent will be retained by the Minister, and why it might not be less, given that the golden share exists and that we can effectively prevent predatory acquisition. Could more not have been floated off to the market?

I believe that Comhlucht Siúicre Éireann Teoranta served the country well because it had very high quality growers who showed their commitment to the industry over many years. It also had very high quality workers within its factories who showed their commitment to the industry over many years together with high quality management. The most recent record of the company is to be admired. Workers and management have enabled the company to go to the market and seek funds in the expectation that it will obtain those funds.

It is encouraging to see that job numbers have increased over the last couple of years and that there are now approximately 1,700 people employed in the company. Going back over the history of the company, we have had some inspirational figures such as General Costello and people who came after him such as Mr. Sheehy, and now Mr. Comerford and Mr. Cahill contribute to the welfare of the company.

I would like to highlight the contribution made by the growers to the Sugar Company. Quite a lot of emphasis was placed on the protection of workers during the Dáil debate on the Bill, which was quite appropriate. The workers are being protected through the golden share mechanism. But it is also certain that the growers must be protected within the new environment in which they find themselves. There are growers in south Kildare and Carlow who are, I would submit, among the best tillage farmers in these islands and in Europe. They have demonstrated year in year out their ability to produce crops of the very highest standard for processing within the Sugar Company factories. They have contributed significantly over many years to the welfare of this country. Their interests should now be protected.

There is a slightly technical matter in relation to the yield of sugar per hectare or per acre. Obviously, the foundation of the sugar processing side of the industry depends very much on the ability of the growers to produce maximum yield of extractable sugar per acre or per hectare. There is every evidence that given the opportunity and given the incentive they can do that, but the overall priority must be one of protecting our national quota within the EC. There is already in this year's price review proposals to reduce the price of beet. I am sure the next quota review will be quite a difficult one, but it must be protected. It is a valuable national asset.

The rights of the growers' representatives in negotiating the price of beet need to be protected in the new arrangement. They must still continue to have negotiating rights. We must be somewhat worried, in relation to the quota, about the implications of 1992 and the Single Market. I realise that there is an intention within the Bill to protect the quota. My concern is that if somebody were to go to law in the European Court or elsewhere, could there be any possibility that growers could find themselves divested of a quota? There must be a cast-iron, solid guarantee that that cannot happen under the 1992 agenda. Perhaps that is something that the Minister can address in his reply.

The growers have concerns which they are quite entitled to voice and which I can sympathise with in relation to payments for beet over the years. There is this whole question of the ghost sugar and the sugar that is extracted from crown tare for which they do not get paid. There has been controversy over many years about the tare system for beet. Even though the growers representatives are present in the tare houses, it seems to be an ongoing sore. I hope that some of the lingering difficulties which have existed between the growers on the one hand and the company on the other hand in relation to the extraction of sugar, the yield of sugar, and in relation to tare, can be resolved as the company advances into the new situation of partial privatisation.

In that respect, the record of the company, of course, has been one in which it has shared its profits to a degree with farming interests and with its workers. I hope that within the new commercial environment the sense of partnership which has existed over so many years and has served the company so well, will continue into the future. There is no doubt that we can compete quite successfully in relation to producing sugar — how it grows, how we process it and how we sell it. We must go forward from that basis.

Having said that, it is quite apparent that if sugar alone were to be the business of the company it could never become large enough to be a successful player within the international food industry. That is why the company must be allowed to diversify. It must be allowed acquire companies both here and abroad, if that is considered necessary. It has already, of course, invested in Odlum's and in Grassland Fertilisers. That is part of a total integration which is to be welcomed. The initiative there has been a very successful one. If we come back to its core activity of sugar, it is quite probable that as we look forward into the next decade we will have more competition from artificial sweeteners and from cane sugar. There is the whole question of the African, Caribbean and Pacific countries and their relationship to the EC in how the sugar market is managed. They are going to pose difficulties on the sugar processing and sugar production sides. That is why the company must move to protect that core business through acquisition and expansion.

One of the things I am somewhat concerned about — and it may have been answered in the debates in the other Chamber, but from what I could read it was not — is that there is a 50 per cent option to take up the balance of the buy out. Is that option going to be exercised through paper? In other words, are Odlum's going to get new sugar company shares to pay for the acquisition of the extra 50 per cent of the Odlum company? I am not clear about that. Perhaps I missed something in the debate in the other Chamber.

Minch Norton in south Kildare is a very significant player in the whole grain and malting barley industry. It is again sensible that if we have sugar beet growers looking for tillage land — and we need acres of tillage land to grow the sugar beet crop — there must be an integration with the malting barley growers and the whole serious side of the business so that the acreage is maintained. For that reason, I would encourage the company to look towards Minch Norton.

Acting Chairman (Mr. Fitzgerald)

I have given you latitude. I do not think you should refer to individual companies.

Mr. Dardis

I will refer to a large malting company in Athy. They must look in those general areas to expand and diversify out of the core business. The Minister, Deputy Kirk, would be quite committed to the whole horticultural scene. He has already demonstrated that through the Bord Glas Bill. There is huge potential. Unfortunately, we have an appalling history on that side of the Erin Foods-Sugar Company equation where, perhaps, we could have done a lot more. The country has huge potential to expand and develop the production of fresh vegetables for an export market. The vegetables that cannot be shipped fresh can be processed. It is possible that that could be done through joint arrangements with some of the very large food companies. It is an opportunity which has been missed in the past. We cannot continue to miss it in the future.

All this can make a great contribution to the welfare of the country, the welfare of rural Ireland and the welfare of workers within a rural environment. That is something that obviously will become increasingly important as we come under pressure from the CAP reform and from GATT. It is through such activities that we can hope to keep viable rural communities in place and provide jobs and lasting economic activity.

In relation to the need for the golden share, it is something to which I fully subscribe. I am glad to see Minister Kirk has returned to us. We were just talking about horticulture and its value and the Minister's contributions to An Bord Glas. I know that he will share the view that the Sugar Company should be involved in the whole vegetable — horticultural side. In relation to the golden share, it is essential that a company of this nature which by international standards is quite small, is not a target for predatory take over. We are seeing on the Continent what the giant companies like Feruzzi or even Beresford, which has a more unfortunate history, can do. It is essential that the value of this company to the Irish people be maintained through the golden share. I have no difficulties about that golden share. We have seen in the milling industry what can happen through predatory takeovers where foreign companies come in and buy Irish mills. We are now down to the stage where we have just two milling groups. We have had bakeries closed down. We have had mills closed down, just because of what has happened.

I mentioned the question of 1992, the GATT and the whole question of the CAP reform. Under the 1992 agenda there will be free movement of capital, goods and services. We must protect the industry within that framework.

There is another matter which is causing growers some concern, and I share their concern. The employees within the company were, on 26 February, circulated with a letter which said that the Minister for Finance intended to offer each qualifying employee approximately £250 worth of shares without payment —"free shares". I have no objection to that whatsoever. That is something to be applauded. It will improve the commitment of the workers to the company. It is proper that they should be rewarded for the input they have made in the company. What I am saying is that if the workers are entitled to that facility the growers are also entitled to a similar facility.

Mrs. Honan

They are getting it.

Mr. Dardis

I am very glad to hear that, Senator. The letter stated that there would be certain income tax consequences, and so on. It is either a facility which is available to all or available to none. In my view, both the workers and the growers have contributed to this company over the years. Both the workers and growers should be rewarded for that contribution. I accept that the workforce must be protected. I think that the mechanisms within the Bill achieve that objective. I am glad that the workforce has increased from 1,500 to 1,750. People can get one share in Greencore for every £9 of pensionable earnings they have in the company, or 500 shares, whichever is the greater. That is subject to a 20 per cent discount. I notice that those discounted shares will be held in trust for a period of approximately two years by a newly created company, Greencore Trustees, Ltd. I realise there are tax implications here. It would be desirable for some people to hold the shares for two years because of those tax implications. I think that if somebody wants to dispose of shares on the market, he should be able to do so.

I realise that the discussion on the Bill in the other House went on late last night. Some of these matters may have been dealt with there. I have certain reservations about the relationship between the Minister for Finance and the Minister for Agriculture and Food under the Bill, and the fact that there is a certain joint responsibility in relation to a lot of matters. My sincere desire is that the Minister for Finance and the Minister for Agriculture and Food continue to get on well together because I do——

Mrs. Honan

It depends on who they are.

Mr. Dardis

That is the point, Senator. Of course, it depends on who they are.

An Leas-Chathaoirleach

The Senator, to continue without interruption.

Mr. Dardis

Thank you, a Chathaoirligh. Your protection is appreciated. It does raise the question as to the relationship between the Minister for Finance and the Minister for Agriculture and Food. There could be situations where that relationship might not be all it should be. Senator Ross raised certain questions as to when it is intended to go to the market, and what the price might be. I wish to have some of the answers that he wanted as well. Is there any indication as to what the price is going to be and when the company is going to be floated? I understand from the stock market that they intend to have meetings at the end of the first week in April with some of the people in Germany and elsewhere. What sort of timescale are we looking at?

It is gratifying that we are now floating off the company when the market has recovered to a very significant degree. That will be to its benefit. One thing we must be conscious of is the critical importance of establishing a price for the shares which does not mean that fat cats who are sitting at boardroom tables across Europe get large windfall profits at the expense of Irish people. I am sure the Government will be aware of that and will attend to it. The price at which the company is floated is a very important matter. On the one hand, we have to try to make it an attractive investment, but on the other hand it would be most unfortunate if there were very large, immediate gains which were lost to the country, or if those gains resided in places which had nothing whatsoever to contribute to the country and in people who are only interested in their own personal and selfish positions.

The state of the market is something which will be a help to the floating of the company. I am sure it will become a successful player within the market and that it will have much to contribute to the welfare of farming, workers and the country. The achievements over many years can be built upon. We are looking forward to a bigger, better and more commercial Sugar Company. Within that context, it is important that the growers, who contributed so much to it, should continue to be paid a fair, equitable price for their beet. It is a profitable crop. It is one of the most profitable crops in farming. Of course, it should be one of the most profitable crops in farming because of the effort that goes into growing it.

Those of us who are old enough can remember what it was like to thin beet, snag beet and to heat beet in frosty weather when it would stick to your hands. Thankfully, we have gone away from those days, but it is still a high capital investment crop. It is still a difficult crop to grow. It requires a high level of expertise. The farmer is entitled to expect that it should be a most rewarding crop. I hope that we can continue to grow Irish beet on Irish farms to be processed in Irish factories for many years to come.

Mr. J. Ryan

At the outset, I wish to protest in the most vehement manner at the undue haste at which this Bill was attempted to be taken and, in effect, was to be rubber-stamped by the Members of this House. I listened yesterday to the statement by the Leader of the House indicating there was a closing date and that the Bill had to be completed. Fortunately, through the good offices of the Leader of the House we have time today and tomorrow to discuss a very important Bill. Might I add that this is the second recent important piece of business, dealt with in this manner? The Programme for Economic and Social Progress was discussed and decisions were taken outside this House which is the place where decisions of such importance should be taken. It is a very dangerous and undemocratic trend if we, the elected representatives in the Houses of Parliament, are only allowed minimal input into legislation of any kind.

This Bill shows scant regard for a semi-State body which has been in existence for 60 years, and which has given tremendous employment. It contributed in no small manner to the national economy, to the workers and to the farmers who are involved in the industry.

Regarding the company's substantial contribution to the economy over those years, I can speak from personal experience. Up to 1987 we had a viable plant in my own constituency in Thurles, County Tipperary. Despite many commitments from management, pre-election promises and local Fianna Fáil manifestos, some time later that same plant went out of operation which had a traumatic effect on the economy of the area. There were serious and substantial job losses which had serious economic effects on the families of those who lost their jobs. Further promises were made by the same people, both management and senior Ministers, after the 1987 election. Replacement jobs were promised in Thurles to offset the job losses. Unfortunately, once again I have to say that the outcome was a very much reduced response in job creation with a continuing serious crisis in unemployment and in the economy of the area. That is why I have to emphasise I am not satisfied with section 6 of the Bill which, I was told today, was introduced in the other House by the Minister for Agriculture and Food, Deputy O'Kennedy, in an effort to protect the workers. In my opinion this is the most important aspect of the Bill.

I have listened to the speeches here today and as far as I can see the Bill is mainly about money, shares, dividends and profits. The human element is sadly lacking in the Bill. That is why I again refer to the serious weakness in the section 6. It was said here today that the Minister has decided to include a section in the Bill so that the workers were still being protected under EC regulations. I challenge this Bill from a local viewpoint. I remember well only two months ago a commitment publicly in the local papers that the Minister would ensure that the workers in the industry would be protected. To me section 6 is not a protection. When you speak about gratuities, pensions and redundancies, you are not speaking about viability. You are not speaking about permanent jobs. You are speaking in terms of retirement, redundancies, pay-offs and loss of jobs.

The vehemence of the Left was referred to by certain Senators some time ago. I am vehemently opposed to that attitude. If anyone in this House considers the inclusion of gratutities and redundancies as a protection for workers I must say I regard it as a direct opposite. To me it is an indication that the workers in the remaining two plants at Mallow and Carlow cannot think positive about their future prospects, but can only look to the implications of the unfortunate circumstances that occurred in Thurles and Tuam where, despite the promises, job losses occurred and redundancies, gratuities and golden handshakes were given out. That is why I am emphasising I cannot accept the Bill itself.

I am concerned basically about section 7 and the effect this Bill is going to have on the permanency of the workforce in the Sugar Company. I listened to the Minister outlining details — the jobs involved, the job creation, the number of people employed by the Sugar Company, and the proposals and hopes of the Sugar Company to increase employment. There is a weakness in section 6 in regard to the employment factor in the industry, and seeing that the company is going private, on past records I agree completely with other speakers that there is no guarantee whatever to the workers, many of whom have given 40 or 50 years service in the plants in Mallow and in Carlow. For that reason I am not happy and will be opposing the Bill at Second Stage. To me it is a case of profits and not workers and their families.

I would also like to support Senator Dardis on our national sugar quota of 200,000 tonnes. It is most important that this quota is protected. It is a vital sector of our agricultural industry which at present is going through a serious crisis. While we have provision for a quota of 200,000 tonnes, there is nothing firm and permanent in the Bill to indicate that the tonnage should be, or has to be, manufactured from our own natural resources. That leaves the door open to the Sugar Company on privatisation to be able to go to plants and purchase the amount of sugar they require to the detriment of the sugar growers who, like the workers, have given considerable service to the sugar industry over the years.

I know the situation in my own area. The sugar factory worker and the man producing the sugar beet were the people who contributed and got little thanks when the sugar factory closed down in 1987. I am not a stock analyst, I am not involved in dividends, I am not a big farmer, I am just an ordinary man in the street who has seen what the factory was worth to Thurles. I have seen the devastation caused by the closure of the factory. I am saying that, unfortunately, this Bill is putting money before people. There is no human profile to the Bill. Because of that I, for one, will be opposing the Bill at Second Stage.

Mr. R. Kiely

This is very important legislation as far as Irish agriculture and particularly the Sugar Company are concerned. I congratulate the Minister and, indeed, the Minister of State here present, Deputy Kirk, for bringing forward the legislation at this time. We are facing a new and exciting phase in European history. It is important that our indigenous industry should be afforded every opportunity of being put on a proper, sound financial footing in order to face the exciting prospects in the new Europe. I am satisfied the Minister and the Government have taken a correct decision in their proposals to restructure the Sugar Company. The legislation will have the effect of allowing the company to develop and expand while, at the same time, it will permit the Government to recoup some of the substantial moneys that have been invested in the company over the years.

I am glad to know from the Minister's speech that the company have reported net profits on ordinary activity since 1986 and had a record after-tax net profit in ordinary activities of £18.2 million in the year ending 30 September 1990 compared with £15.4 million in 1989. Extraordinary charges of £5.9 million reduced the retained profit in 1990 to £12.3 million. During the period of recovery, profits were applied in reduction of borrowings and large accumulated losses which had been incurred prior to 1986. Turnover was £271 million made up as follows: sugar division, £133 million; food division, £74 million; and agri-trading division, £64 million. It is good to see their policy in diversification making profits.

The Sugar Company were set up under the provisions of the Sugar Manufacturing Act, 1933, with the main objective of manufacturing sugar from beet. However, over the years the company have diversified into many areas such as agriculture, heavy engineering, food processing, fertiliser distribution, molasses trading and many other areas. Partial privatisation will further enhance the process of diversification which, in turn, will lead to greater profitability and, subsequently, greater job creation. The company were in a loss-making situation in the early eighties but due to commitment, loyalty and dedication of both employees and the small farmers — the beet growers — we have now a very profitable and effective company. Turnover has reached over £270 million with an operating profit of £18 million, as was already mentioned in the Minister's speech.

I am obviously very concerned about the long term viability and future of this company. I am satisfied that the legislation before this House will protect the future of both the employees and the farmers who depend on the Sugar Company for a living. I am glad the Minister has recognised the very important role which both the employees and the farmers have played in the expansion of this company. He has made provision for a shareholding for both employees and farmers that will further enhance the company and will ensure the continued loyalty and commitment of both the employees and the farmers in the development of the Irish Sugar Company.

I also welcome the provision which allows the Minister for Agriculture and Food to acquire a special share in the holding company. This will prevent the disposal of the controlling interest in Siúicre Éireann of the Sugar Company's assets. I call on the Minister to ensure that under no circumstances can this share ever be sold. This morning, the Minister said that as a result of discussions with The Irish Congress of Trade Unions and representatives of the beet growers, he specifically included in the Bill a provision that the special share may not be sold.

Particular attention must be paid to the 5,000 growers who are the cornerstone of the Sugar Company. It is vital that growers will be party to any future decisions regarding the distribution of the Irish sugar quota. The new company must recognise the rights of existing contract holders in traditional beet growing areas. Over the years, the number of occasions on which the Sugar Company returned a loss were few, in spite of having to trade in some very unfavourable economic conditions.

In the past 15 years the company have embarked on a major capital investment programme. This is very evident to anybody who has recently seen the major changes in two of its factories. This programme was essential if the company were to keep pace with international competition in the sugar sector. Successive Governments have contributed towards this major investment programme by making Exchequer advances to the company in order that their debt-equity ratio would remain in line with commercial norms.

This investment was essential to ensure the survival of the sugar industry, since the finance was required to replace obsolete machinery and to increase the production efficiency of the various factories. This rationalisation programme also saw the closure of two factories in Thurles and Tuam. The programme of investment that has taken place in Mallow and Carlow will streamline their operation and hopefully will put them in a position where they can take advantage of the new Europe.

The introduction of this Bill constitutes a recognition by the Government of the central role played by the Sugar Company in the development of agriculture in Ireland over the past 60 years. It places on record the commitment of this House to fostering an ordered future for the Sugar Company. As regards farmers, they should be considered as partners in this whole new structure.

Privatisation was mentioned by Senator Ross and, like Senator Dardis, I was at a loss to know whether he was in favour of or against privatisation. I cannot understand why people, including politicians, have a fear or dread of privatisation and going to the market for money. It gives every citizen the right to purchase equity in the new body. Privatisation has been a success in Britain and on parts of the Continent. Since it was introduced as a new concept 12 or 13 years ago in Britain, many of the privatised companies have enjoyed outstanding profitability and success. That outstanding profitability and success would lead to further job creation and it would not be all about money, it would be actually about people and Senator Ryan can forget his concerns in this area. I am firmly convinced that we should have more partial or full privatisation in our semi-State sector if it is to be successful and if we want to see growth in that area. Greenvale will become a major player in the food business. That is a subsidiary of the Sugar Company.

Growers of Sugar Beet have been involved in a very profitable enterprise during the past few years. Hard work is involved. There can be a late spring or a bad winter, causing difficulties for farmers and for the workers in industry.

Senator Dardis said he thinned beat as a young boy and did other work with beet. I remember doing so myself and I remember covering beet in frosty weather. If I had cut off my fingers I would hardly have felt it my hands were so numb. Those were the conditions in which farmers of that time had to work, but it was their work and commitment that led to the success of the Sugar Company.

Late spring can have a retarding effect on a crop which must be high yielding if it is to be profitable. Bad weather can lead to expensive spraying with herbicides and pesticides. There can also be problems in very dry years. It is a vital crop in the rotation system. You can have beet one year, cereals another year and grass another year, and that is what leads to good farming.

We have the distinction of having disease-free sugar beet. We do not have the worry of the new disease in the United Kingdom. We are fortunate that we are an island country and that helps us to maintain our disease-free status, whether it be in crops or cattle. There are also problems on the Continent which we do not have. I hope we can long have a protected industry so that the company will be a success both for itself and for the farmers and the workers at all levels.

I compliment the Minister for the manner in which he consulted with the farmers and so on, prior to the publishing of this Bill. I again congratulate the Minister and I am sure this legislation will ensure a better future for the Sugar Company, for the farmers involved in the industry and especially the employees.

Mr. Hourigan

I welcome the Bill. I believe it is a step in the right direction and while there may be certain amendments one would like to see introduced here and there, the main thrust of the Bill is what right-thinking people should accept. As Senator Kiely said, people should not be afraid of privatisation in so far as, in this instance, provision is clearly there for the workers, the growers and anybody else to become involved to the extent that they want to become involved. There are special and easy measures for their involvement in it. We are not talking over something and closing a door and keeping people out. That is not the proposal from the Government.

There is a background to all this development and the increasing losses in the semi-State sector. In the seventies and the eighties the attitude to semi-State bodies changed totally. This is the very relevant background that has led us to the situation in which we are today. Obviously, in common with other semi-State bodies, the Irish Sugar Company incurred large losses. It required additional equity from Government to prop it up; it was clear this could not and would not continue. The company was given a brief to operate on a commercial basis. The company took that brief on board and set in train a major plan to improve its competitiveness. That involved closures, cutbacks in staffing, and investment to improve its performance. The success of these actions, together with the equity injection from Government, is clear from the major turnaround which has been achieved. In the recent accounts, the group earned operating profits of £26.7 million; in 1986, the comparable figure was £12.5 million approximately.

We look to the future and while performance to date has been good, one must ask where does the company go from here? It is highly dependent on sugar for profitability, consequently it is highly dependent on that arm of its business. However, expansion of sugar production is not realistic because it is controlled by quota limitations and these have been referred to already. Ireland has, as we know, an A quota which is 182,000 tonnes and a B quota of 18,200 tonnes so while sugar is profitable, it does not, of itself or in itself, provide growth possibilities.

The company must use the profits from sugar to fund development in other areas. The funding development through cash generation from activities can be a slow process. Opportunities can pass by while the cash is being built up. Equally, many would-be sellers would prefer shares or a mix of cash and shares. It is out of the question, in my opinion, that the Government would provide additional equity to fund future business purchases. Indeed, one could argue that it would be inappropriate for the Government to fund Irish Sugar to purchase business in competition with other private sector companies. In other words, the Government would be using taxpayers' money to compete with other operators in the arena of purchasing companies.

While one cannot expect the Government to provide additional equity to fund commercial risks, the Government should expect a return on their investment in the company. In the eighties, they invested £59 million and to date have not received any dividend from that substantial investment of money. With regard to flotation, the sale of a majority shareholding by Government is the better option for the company. However, it is necessary to protect the interests of beet growers and employees. This is being achieved by means of a golden share which ensures that the beet quota is retained in Ireland. The quota is a national asset and should be protected. The sale of the company to another company or individual would not have achieved this same degree of protection. That is important — the retention of the quota in its entirety. The rights of workers should be protected on changeover to new ownership. The company is in the process of concluding agreements with trade unions and others concerned to ensure that there will be no reactions from these quarters. While the company flotation should yield money for the Government, it is important that the company itself will raise cash. This is important to ensure a good price as the institutions will expect it. The money should be used to fund the various operations in the future.

The Government will receive a return on their investment by means of the sale of shares and by means of the ongoing dividends on the shares it continues to hold in the company. The Government will retain not less than 45 per cent of shares in the company.

Beet growers' interests must be protected by means of the golden shares. This also benefits the employees, and their interests too, must be protected. The emphasis will be on expansion rather than cutbacks. For the company, flotation will mean that it can expand in the agri-food sector. It will be subject to the disciplines of the open market rather than those previously imposed by the State. It faces a tough task but we need a larger, efficient company to meet the competitive challenges of the European Market.

There are a few points in the annual report of the Irish Sugar Company, 1990 I would like to refer to, with particular reference to some remarks made by the general manager of the Irish Sugar Company. The general manager of the Sugar Company, Mr. Comerford, has played a magnificent role in ensuring that the company has been brought to a position of significant improvement. We understand from the report that in 1989-90 the group achieved new record levels of turnover and profitability. Turnover increased by nearly 26 per cent, to £271.4 million. This mainly reflected the impact of the Odlum acquisition during the financial year. Profits before tax on ordinary activities were £21.97 million, an increase of £4.86 million on the previous year. However, the level of retained profits was reduced due to the treatment of the group's investment in replacement activities undertaken following factory closures.

I believe that 20,000 square feet has been set aside for an advance factory by the IDA in Tuam. It is a matter of great urgency that this 20,000 square feet be taken up at an early date and that employment be provided in the Tuam area. When Tuam closed — and I am not saying it should not have closed — there should have been much needed jobs provided in that part of the country. I would urge the Government, through the IDA, to make sure that that advance factory is brought to a position where jobs are available from it.

Debate adjourned.

Seanad Éireann debate - Thursday, 14 Mar 1991