B & I Line Bill, 1991: Second Stage.

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

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

The primary purpose of this Bill is to provide for matters connected with the sale of the B & I Line plc to the Irish Continental Group plc (ICG).

The basic terms of the sale are that ICG will pay £8.5 million to the Minister for Finance in return for the entire issued share capital of B & I. This transaction will take place when all conditions relating to the sale of B & I have been completed.

The conditions to be met prior to the sale involve the Government removing accumulated bank and other debt from B & I's balance sheet. This amounts to £35 million. The Government may decide to do this either by injecting the requisite amount of additional share capital in the company to enable the debt to be paid off, as provided for in section 2 of the Bill, or also by assuming direct responsibility for part of the debt, as provided for in section 3.

Section 3 also provides that the aggregate amount arising under sections 2 and 3 will not exceed £36 million. This maximum amount includes a contingency figure of £1 million over and above the £35 million Exchequer investment envisaged to provide for any subsequent adjustment which may be required in exceptional circumstances.

The origins of this Bill extend back to March last year when the House was debating the B & I Line Bill, 1990, to provide further additional Exchequer funding for the company. During the course of the debate on that Bill, I announced my intention of carrying out a review of the future options for B & I. My main objective in doing this was to determine how soon the company's dependence on Exchequer financial support could be ended. At the same time, I wanted to take into account the strategic shipping needs of our importers and exporters, as well as our tourism industry. In the intervening period, a very significant amount of work has been carried out which is reflected in the Bill before the House.

Before proceeding further with the events leading up to the Bill, I believe it is appropriate to spend some time in reviewing the history of the State's financial involvement in the B & I.

The British and Irish Steampacket Company Limited, now the B & I Line plc. was acquired by the State from private interests in 1965 at a time of great technological changes in shipping and competition on cross channel routes. The main objective of the acquisition of the B & I was to maintain and improve services and to ensure competition in sea transport between Ireland the the UK. That objective is as valid today as it was then, but State ownership is no longer the only way to achieve it. B & I's main competitor, Sealink, was sold some years back by British Rail and has more recently been acquired by the Swedish based Stena group.

The B & I was mandated in 1965 to operate on strictly commercial lines. The company's core objective was to provide and develop a modern, efficient, profitable and national system of sea services to and from Ireland.

Notwithstanding the commercial mandate given to the company, the Minister for Finance, as shareholder, has been called on to make total Exchequer equity injections in the B & I of £106 million since its acquisition in 1965. Equity has been injected each year since 1976 for working capital purposes with £53 million of this alone being paid since 1985. Despite these costs, the company is still heavily dependent on Exchequer funding and will require further major investment or fleet replacement over the coming years.

To coincide with a substantial Exchequer equity injection in 1986, the board of the B and I implemented a major restructuring programme. This involved changed operating methods and staff reductions. The measures adopted by the company were not, however, sufficient to contain the deterioration in its financial position. The board of the B & I submitted in December 1986 further major rationalisation proposals to the then Minister for Communications. This was followed in February 1987 by a request from the board for additional equity from the Exchequer to enable the company to continue trading.

In May 1987, the Minister directed the board to submit to him as soon as possible a plan of action aimed at achieving a substantial reduction in the company's losses. As a result, the board embarked on a series of intensive negotiations with all of the unions concerned. On 11 December 1987, the board presented a plan of action to the Government which had "across the board" support from the company's workforce.

The Government noted the plan of action but did not commit themselves to the further substantial equity requirements envisaged over its term. Despite the achievements under the plan, these were never sufficient to remove the company's heavy debt and its ongoing reliance on Exchequer funding. Additional equity injections of £6.2 million, £4.8 million and £6 million were made by the Exchequer in the years 1988, 1989 and 1990, respectively.

In view of the examination of the future options for the B & I which had been initiated earlier in the year, the Government decided on 11 December, 1990 not to approve the injection of further equity into the company in 1991. As an alternative, it was decided that the Government would guarantee the minimum borrowing required to enable the company to continue trading and thus avoid liquidation. The amount of B & I loans subject to Government guarantees stood at £14.7 million on 31 December 1990. Since then, a further short term facility of up to £8 million has been guaranteed by the Government in 1991. This cash has been used by the company to meet its ongoing commitments, including interest and other charges, despite realising a trading profit before interest charges of more than £2 million. The total amount of B & I borrowing guaranteed by the State at 31 December 1991 will be approximately £21.4 million. All State guarantees of borrowing by the company will cease following the sale.

There has been much comment on the improved operating performance of the B & I and increased traffic carryings under the plan of action. I have consistently acknowledged this to the board of the company and publicly. I also took the opportunity of doing so in the Dáil last week and I would like to place it on the record of this House today. Let me now do so. I want to acknowledge and publicly thank the board, the management and all the staff of the company for their efforts in making the plan of action work. Nobody appreciates more than I do the very difficult circumstances they have had to work in over the past numbers of years. They did so in a very professional and exemplary manner.

However, the fact remains that despite reported operating profits of £1.8, £2.8 and £2.3 million in the last three years, the company needed £6.2, £4.8 and £6.0 million cash from the Exchequer to stay in business. Unfortunately, the company can only finance its operations with substantial and continuing equity injections from the Exchequer. It is also clear that the B & I has been unable to generate the resources it needs for the renewal of its fleet which will be necessary if it is to remain competitive and maintain market share. The chairman, on behalf of his board, has made these points to me on a number of occasions. It was against this background that I launched the review of the options for the future of the company to which I have already referred.

In May 1990, the board of B & I submitted to me options for the future of the company under various scenarios. These options made it clear that the status quo could not be maintained. On the contrary, the only way to ensure the future survival of the company was to undertake further rationalisation and substantial job reductions so as to eliminate the unprofitable areas of activity and achieve further improvements in efficiency. The board's rationale was based on the clear recognition of the need for the company to gear its operations for the increasingly competitive conditions in the marketplace for both tourism and freight. The board also highlighted the need for balance sheet restructuring as part of any long term solution. The benefits that would accrue from economies of scale by a merger of the activities of the company with another shipping company were also highlighted together with the potential that such would provide for financing future development needs. In response to these proposals, I sought independent advice to ensure that every possibility was fully explored and I conveyed this decision to the board at the time.

In August 1990, I commissioned Stokes Kennedy Crowley Corporate Finance Limited to advise me on the best and most economic means of terminating Exchequer support for the B & I at the earliest possible time, having regard to the need for adequate capacity and competition in the provision of passenger and freight shipping services to and from Ireland. The report from Stokes Kennedy Crowley Corporate Finance Limited came to broadly similar conclusions as the report from the Board of the B & I on the realistic options which were available to meet the objectives as outlined.

The consultants examined the feasibility of four key options for the future of the company. These were: continuation of the status quo; redevelopment with major capital investment; liquidation; or the sale of the company.

The feasibility and financial implications of each of these options was assessed by the consultants and they identified the sale of the B & I as the most favourable option. They were of the opinion that this option would have a positive effect on access transport services in a situation where the purchaser would bring financial and operational strength to the company, resulting in greater competition on Irish Sea routes. They also believed that a sale would secure the future employment of the majority of the company's employees.

The Government considered the consultants' report in September 1990 and decided that the consultants should be requested to explore the level of interest which existed in the international shipping market for the acquisition of B & I.

SKC then proceeded to have extensive discussions with a number of interested parties. A prerequisite of all parties was that the State would assume responsibility for most or all of the company's substantial long term debt because it quickly became clear that there was no prospect of effecting a sale unless the Government agreed to take over the company's debt. A significant reduction in the workforce was also an integral part of each of the proposals.

Before finalising their recommendations, Stokes Kennedy Crowley also had discussions with the management of the B & I who had submitted a proposal for a staff/management buy-out of the company. These discussions were held specifically at my request.

Having assessed all the offers made by the interested parties, the consultants strongly recommended that the Government should pursue the offer made by Irish Continental Group plc, which trades as "Irish Ferries". In their view, this would offer a firm prospect of ensuring a strong strategic shipping line, under the Irish flag, of sufficient scale to compete internationally.

The Government decided on 16 January 1991 to proceed with negotiations for the sale of the B & I to Irish Continental Group plc. A memorandum of agreement for the sale by the Minister for Finance of the entire share capital of B & I to ICG was signed on 28 February 1991. A clause in the agreement provided that it would lapse if, for whatever reason, the sale was not completed by 16 August 1991. Following the signing of the agreement, ICG had a comprehensive due diligence exercise carried out on B & I. This led to further complex and protracted negotiations with my advisers on a range of additional items in respect of which ICG had sought compensation.

ICG also entered into extensive negotiations with the B & I unions with a view to reaching a comprehensive agreement on rationalisation and work practices prior to completion of the sale. However, I regret to say that negotiations with the unions took much longer than was anticipated.

By 16 August 1991, a share purchase agreement had not been concluded and, accordingly, the memorandum of agreement with ICG expired on 16 August 1991. Nevertheless, further detailed discussions were continued with ICG after 16 August. While progress was made, the expired memorandum of agreement was not replaced by any new legal agreement.

During September, while discussions were continuing with ICG, I received representations from the Chairman of B & I, acting on behalf of independent board directors, to the effect that in their view the terms of the proposed sale to ICG did not represent good value. They recommended that, in view of the Government's intention to proceed with the sale of the company, the way should be opened once more to competitive bids. The chairman of the B & I Board advised me that, given a decision to sell at the best price available, the advice was that fair value is whatever is the best price that can be obtained in the market.

At the same time, my advisers became aware that a consortium of the B & I management and staff, together with their Danish backers, were anxious to make a revised offer for the company. My advisers had informal discussions on 2 October with the Danish backers who indicated the type of offer they would support. They indicated that they would need two weeks to make a final decision.

Approximately one week later, Mr. Blaesbjerg and some colleagues, together with B & I management, met with Stokes Kennedy Crowley Corporate Finance Limited. They asked, inter alia, for permission to carry out a due diligence exercise on the B & I. As I had not made a decision at that stage whether to re-open the tendering process, I refused Mr. Blaesbjerg's team access to commercially sensitive information on B & I.

On 14 October last I asked the Secretary of my Department to obtain from the B & I management consortium within seven days an indication of the type of bid they would make for the company. I obtained this on 21 October.

I should emphasise that up to this date there has been no trade union involvement in the MSBO/staff buy out consortium. However, when the B & I group of unions requested that they be given an opportunity in conjunction with the MSBO consortium to prepare a proposal for the acquisition of the company, I agreed to allow them two weeks to do so. I may tell the House that I did so reluctantly as we had already been through an exhaustive trawl of the international shipping market and a competitive tendering process for the sale of the company.

The fact that I agreed to reopen the process was in deference to the views of the chairman and the independent directors. More importantly, it was a major concesion on my part to the management and the trade unions. These are the facts and so I must, therefore, reject the claim which has been made that I used the MSBO to get ICG to increase their bid.

Both Irish Continental Group and a consortium of B & I management and staff, together with their Danish backers, were invited on 25 October to submit fully comprehensive offers within a two week deadline ending on 8 November 1991. I conceded to requests from the consortium for an extension of the deadline. This was extended firstly until 15 November and then for a further week until 22 November, 1991. As a result of the collision involving the m.v. Kilkenny, I agreed to give the MSBO consortium a further extension until 28 November. An offer was finally received on that date from the consortium. A further period was subsequently allowed for clarification of the offer. In all, a total of five weeks was allowed. ICG were given the same five week period within which to submit a revised offer.

I appointed an assessment committee comprising representatives of my Department, the Department of Finance and Stokes Kennedy Crowley Corporate Finance Ltd. to examine the two offers. Following detailed consideration of the offers the assessment committee made a unanimous recommendation to me, which I accepted. This was that the sale should be concluded with Irish Continental Group subject to final agreement on all issues.

The Government considered the matter at their meeting on 4 December 1991. This allowed seven days for the assessment committee to make their recommendations. During the Government meeting I became aware of information from the advisers to the MSBO consortium to the effect, inter alia, that the management and staff had withdrawn from the consortium bid involving Danish interests and wished to have an amended bid submitted on their behalf on terms substantially similar to the consortium bid.

While the terms of this revised offer were presented as being substantially similar to the MSBO consortium bid, the fact is that only £2 million of the proposed £5 million purchase price offered could be paid immediately. The balance would be paid on a deferred basis which would have to be agreed. In addition, the revised offer proposed that discussions with suitable partners, including Irish Ferries, would take place after 12 months. The revised offer was, in truth, worse than the previous MSBO offer which the assessment committee had advised against. Logically, therefore, the fresh proposals had also to be rejected.

Having considered the overall position in the light of the report of the assessment committee, the Government decided that the sale of the B & I to Irish Continental Group should take place subject to final agreement on all issues. In arriving at their decision the Government noted the view of the assessment committee that the buy-out proposal had represented a welcome initiative in Irish industry, involving an equal partnership between management and staff. The Government agreed with the committee's conclusion, however, that, in line with standard practice, the B & I should be sold to the best offer, Irish Continental Group, unless there were other compelling circumstances for not doing so. On the basis of the two offers received, the Government were satisfied that there were not.

The ICG bid of £8.5 million is substantially better than the MSBO offer of £5 million with £3 million of that on a deferred basis. Both ICG and the MSBO consortium sought an Exchequer investment of £35 million to remove the company's debt prior to the sale. Clearly, the sale to Irish Continental Group will result in a substantially lower cost to the Exchequer.

I am satisfied that the sale to the Irish Continental Group represents the best project for the future development of the B & I. It will create a strong shipping entity with substantial synergistic benefits, a proven track record and the ability to make the necessary investment in the future of the combined entity. In this regard, ICG are committed to investing more than £30 million in the B & I over the next five years.

I would see the following as some of the main additional benefits which can be expected to accrue from the acquisition of the B & I by ICG: the maintenance of vital Irish shipping/maritime skills; the maintenance and development of critical shipping routes vital for tourism and national transport needs; the creation of the platform for an increase in capacity and improvements in the quality of services; competitive market-led fare policies; the overall enhancement of B & I's services and, in particular, the development of its central corridor and Southern corridor services; removal of the requirement for ongoing Exchequer funding; and the maintenance of B & I's ships on the Irish register. These benefits should make a substantial contribution to employment creation both directly and indirectly.

In essence, the sale will lead to the creation of a strong Irish shipping company with the potential to alleviate the twin evils of undercapacity and high access costs. It will also preserve competition, which is a vital ingredient in achieving these objectives. The provision of a modern, efficient and competitive access transport network, integrated as far as possible with the rest of the European Community's network, is of vital concern to the Irish economy.

ICG is committed to the creation and development of a dynamic shipping entity, under the Irish flag, which will be capable of competing internationally — a company which has committed itself to providing high quality service and secure employment. The employees of B & I will now have an opportunity of directly participating in this strong new Irish group.

At this stage I would like to inform the House that last Tuesday my Department signed an agreement with the Irish Congress of Trade Unions and the B & I unions on matters relating to the sale of B & I to ICG. I would now like to read this agreement into the record of the House:

The Irish Congress of Trade Unions and the B & I Group of Unions acknowledge the view of the Minister for Tourism, Transport and Communications that the acquisition is in the best long term interests of B & I, its employees and customers and also acknowledge his views that it will lead to the creation of an enlarged Irish-owned shipping enterprise with the resources to develop and provide an enhanced level of services to Irish tourism and export trade.

The Minister for Tourism, Transport and Communications accepts the legitimate concerns of the Irish Congress of Trade Unions in relation to the future development and ownership of the B & I Company and the development of Ireland's access transport services.

To address these concerns, the Minister hereby affirms that the Government

(1) fully accepts the importance of shipping for Ireland from a strategic point of view;

(2) will seek to have at all times sufficient ships on the Irish Register which could be utilised in times of emergency to service our strategic trading routes;

(3) will continue to pursue vigorously with the European Commission Ireland's case for the funding of improvements in access transport services.

The Minister also affirms that ICG have indicated to him their intention to maintain the company in Irish ownership and have confirmed that their plans for B & I over the next five years include:

—The retention of all existing B & I shipping routes;

—The provision of extra capacity on the m.v. Leinster;

—The sourcing of an improved vessel to replace the m.v. Munster on the Rosslare/Pembroke route;

—An upgrade of facilities throughout B & I;

—The replacement of B & I's container ships;

—The provision of long term sustainable employment in B & I;

—Share ownership for B & I employees.

The Minister undertakes to obtain from ICG an undertaking that they, ICG, will fully abide by the current Trust Deeds and Rules of the B & I Pension Funds as disclosed to ICG during the due diligence exercise.

The Minister acknowledges that the ICTU and the B & I Group of Unions strongly feel that he, on behalf of the Government has a pivotal role to play in ensuring these pledges by ICG are fulfilled. Accordingly, they have sought a specific undertaking from the Minister that he will perform this role.

The Minister undertakes to introduce an amendment to the B & I Line Bill, 1991 on rights of employees as agreed with the ICTU and B & I Group of Unions as per attached.

Subject to ratification by its members, the ICTU and the B & I Group of Unions have confirmed that they are prepared to positively cooperate with the sale of B & I to ICG on the basis of this Agreement.

This is a very important agreement which has been entered into with the ICTU and the unions and I am very proud that it has been achieved. As I said in the Dáil earlier this week, I look forward to the amalgamation of these two Irish companies and wish them every future success. I also wish to thank the board, management and staff of B & I for their constructive and co-operative approach throughout the lengthy and complex negotiations. I would also like to thank the Irish Congress of Trade Unions, with whom I share the same vision and goal for the development of a sound shipping industry which will sustain and expand employment for Irish mariners.

I commend the Bill to the House.

Mrs. Doyle

I welcome the Minister to the House this morning and, in case I forget to do so, I would like to wish him a very happy Christmas. No doubt he will enjoy it all the more if this legislation has been safely passed in both Houses.

Quite a lot has happened in the last week since this Bill was debated in the Dáil. I would like to commend the Minister, and indeed ICTU and the B & I group of unions, for the agreement that was entered into during the week because it is a most important agreement. Indeed, it augurs well not only for the future of B & I but also of the enlarged Irish Continental Group, or whatever title it will sail under if there is any change. Because of the strategic national interest and the area of interest involved in importing and exporting and the tourism area in the provision of shipping services and ensuring that we have enough ships on the Irish register to deal with any emergencies should they arise, this debate deserves our full and detailed attention.

I support the Bill and I welcome the approval of the sale this week between the unions involved and the Minister. It is very reasonable that the price and conditions of this sale of a commercial semi-State company, which is at last returning to operating profits after a number of loss-making years, should be queried and examined by the Houses in detail. Indeed we should put some strong questions to the Minister in relation to different sections. The initial reluctance of management and unions at B & I to accept the idea of privatisation is also understandable. The management and staff must be complimented and credited for their achievements since 1987 in very difficult times since the major restructuring under the 1987 viability plan was entered into. For the record, freight to the Continent in those few years has doubled in B & I. Car freight has gone up by 50 per cent, the ro-ro freight is up by 75 per cent and company losses went from £3.5 million in 1987 to operating profits of £2.5 million in 1990.

The workforce took a 5 per cent decrease in pay and agreed a wage freeze until 1991 and there were major cutbacks in the numbers employed from 1,460 to 900. We must compliment the management and staff in B & I for those achievements. However, as the Minister has detailed, they were not sufficient to ensure a viable future for B & I as an operating entity on its own, particularly because of the chronic debt problems and the need to upgrade the fleet and to secure new routes.

I think most of the figures are well known at this stage. B & I has a deficit of over £128 million in its revenue reserves and has a £35 million debt. Operating profits, no matter what they would be, were always wiped out by the massive debt servicing bill involved.

Early in 1990 the board of B & I submitted to the Government an alternative development plan for the company. This called for a fresh cash injection from the taxpayer of £70 million. Understandably, I think, Government reaction was cool. Over the last ten years alone £100 million in fresh capital has been pumped into the B & I by successive Governments as well as guaranteeing £16 million of B & I's borrowings. The B & I development plan also envisaged EC support, presumably through transport or Structural Funds, but this may have run into criticism from private companies on the grounds of unfair competition. I would be interested in the Minister's comment whether there would have been a possibility of EC moneys being drawn down by B & I themselves and, if not, why given that economic commentators in other quarters have commented on this point.

As the Minister outlined, the Government called in Stokes Kennedy Crowley to report on the best way forward for B & I. We must remember, in debating this Bill, that one of the four options considered was liquidation. Faced with the problems that I have mentioned of chronic debt, the need to update the fleet and to service new routes, it must have been quite a difficult decision for Stokes Kennedy Crowley. In the summer of 1990 they strongly recommended privatisation after considering the different options. The Government sought tenders in October 1990 from Maersk, P & O and Irish Ferries after Irish Ferries had submitted an indicative bid of around £6 million as this had been considered too low by the Government.

It quickly became clear that both Maersk and P & O were not interested and at this time the offer of Irish Ferries, as we refer to them, or the Irish Continental Group, to give them their full name, was less than the £6 million indicative bid. We were going backwards rather than forward trying to get value for the taxpayer. The Irish Continental Group were the only interested party. The Government subsequently suggested that B & I formulate a case for a management buy-out plan. After much toing and froing which the Minister has detailed, this was considered together with the Irish Continental Group increasing its bid to £8.5 million subject to a performance clause. Again, I would like the Minister to comment on this so-called performance clause. We understood, again from press reporting, that if B & I did not turn in an operating profit of £2 million or £2.5 million this year, Irish Ferries would be able to reduce the £8.5 offer by how much and on what terms I am not sure, but it would be interesting, for the record, to know what are the specifics of the performance clause, if, indeed, there are any.

The Minister, as he outlined, accepted the Irish Ferries bid as effectively the management staff buy-out offer could not compete in cash terms and did not represent, on the face of it, as good value to the Irish taxpayer as the Irish Ferries bid, albeit accepting that the Irish Ferries bid was not excessive by any means.

The Irish Continental Group have also committed £30 million over five years for capital investment and this should be considered as part of their bid price. They have committed themselves to inject capital in the fleet and, indeed, in port facilities at strategic points along our coast — badly needed. Part of the lack of interest in B & I was due to the run down condition of their facilities and assets generally.

The Irish Continental Group have also committed themselves to the retention of all existing routes and to the provision of long term sustainable employment in B & I. It is known that the Irish Continental Group will be looking for 250 voluntary redundancies over the next two years or so from the 900 workforce now in B & I. This figure has been compared to the 150 redundancies envisaged in the management staff buy-out offer. However, it now transpires that the B & I had agreed to transfer its passenger operation on the southern corridor — the Rosslare/ Pembroke operation — to Sealink starting the 1993 season. B & I would have kept the freight themselves and this transfer of the passenger operation would have involved the loss of another 100 jobs in B & I.

When we are comparing the two offers — the management staff buy-out and Irish Ferries — I feel that one way or another at least 250 jobs in B & I would have gone because it is quite justifiable to include the extra 100 jobs that would have been lost on the southern corridor, the Rosslare-Pembroke corridor, as a result of the agreement they had entered into with Sealink about passenger services from next year on.

I will be monitoring very closely the Irish Continental Group's promise to increase their present 22 per cent of market share on the Rosslare route to 30 per cent over the coming seasons and, indeed, watching the replacement of the m.v. Munster with a ship comparable to the Stena Felicity. This would be a tremendous boon, particularly to that part of the world I come from and apart from emphasising the important strategic location of the southern corridor, it will also ensure a future and competition on that route with Sealink. Sealink give a tremendous service there now and within an upgraded vessel from Irish Ferries on that route would ensure that the travelling and business public using those ships would get excellent value for money.

The complaints about the sale price of B & I are understandable and reflect a major disappointment in relation to the huge investment over the years by the Exchequer or the taxpayer generally. However, given the needs of B & I for fleet investment and debt servicing, the lack of interest in the company which has to be underlined and the fact that the management buy-out offer represented even less value to the taxpayer, I think perhaps the Minister has reached the best possible position in relation to the future of B & I.

There is, however, one major question that needs to be answered, and this is the one area in which I have not read any comment from the Minister or heard of any comment being attributed to him: as the Government have now guaranteed to clear the balance sheet of £36 million as part of the deal, why did they not let B & I trade on profitably, with no debt burden to service, for a number of years and then sell it to the private sector as a profitable semi-State company which could command up to ten times its pre-tax profits? Irish Sugar turned their profitability around in a short few years and the taxpayer got reasonably good value; I will not go into too many details of the hidden agenda, but on the face of it at the time we thought we were getting good value. The State was selling a profitable semi-State company at the time and there were returns to the taxpayer. Incidentally, I am delighted the Minister is briefing Senator Mooney to reply to me on that because this is a very important question.

Mr. S. Brennan

Not quite.

Mrs. Doyle

I have no major objection and I think a lot of hard work has been done by various parties, to trying to get the best possible deal. We are all disappointed with the £8.5 million. We recognise there is £30 million committed also in capital investment which is back to the essential point but it has been agreed to wipe off the £36 million either under section 2 or section 3, or perhaps otherwise. Why could the Government not wipe that off anyway this year and allowed B & I to trade profitably for some years when they would not have the problems of the debt burden and then sell at eight to ten times or even more of their operating profit as has been done in the past? This is the one major criticism I have not heard the Minister defend and I certainly cannot even begin to think how one would answer that. What was the urgency of selling them if this year given that the debt burden was going to be wiped off in any event? If they were trading profitably and had no historic borrowings to service, B & I themselves would have been in a position to invest in the fleet, albeit with limited borrowings, but borrowings that could be serviced by their profitability levels? There was no question of their being able to invest in their fleet given the huge historic debt burden they had to service. Any money they earned was just swallowed up competely. This is an area where the Minister is perhaps open to criticism given how we have handled other semi-State companies and the privatisation of other semi-State companies. I think we could do with a detailed explanation as to why that option was not preferred at this time.

Mr. Mooney

I will leave it to the Minister.

Mrs. Doyle

It is accepted that the State cannot meet the needs of B & I for capital investment at the moment of £30 million over five years but, as I said, with no debt and reasonable pre-tax profits, B & I may have been in a position to provide for its own investment allowing for reasonable borrowings. Basically, what is the hurry? Why not wait until the taxpayer could recoup some of the £150 million that has been invested over the past 25 years in B & I? I have no argument with Irish Ferries. They are obviously a clever and successful company and appear to have got great value for money. They are strong on the Irish Sea and I wish them very well with their purchase.

The whole aspect of a golden share of the retention of the State equity or the lack of retention needs justification by the Minister in his response to Second Stage. My colleague, Deputy Yates, got quite exercised about this aspect of the debate in the other House but I do not find myself getting into such a lather about it. I think there is a very reasonable case to be made in relation to precedent because I think I am right and I stand corrected if not, that in all other privatisation operations of semi-State companies, the State has retained an equity share or a golden share. At least the intention is to retain that for some time and the State could relinquish its share over a number of years if it had transferred smoothly. I think this is the only occasion on which a semi-State company has been privatised and the Government have not retained an equity or golden share. This could enhance the company from the point of view of attracting investment. If the State was involved it would be seen as a blue chip equity stake in the company.

There is also a down side in that it has been said that if the State maintained an equity share it would be seen as a sort of Achilles heel in the shareholding if any subsequent difficulties arose with the unions and they would be able to put the pressure on the State and, dare I say, the State might be more vulnerable to pressure than a private company if there were later difficulties with the unions. That has been put to me as a defence of the Minister's present position but I think we do need to know why there has been a move from established practice in this area and indeed why perhaps the taxpayer could not maintain a holding, a golden share and benefit from any upturn in fortunes in B & I over the next few years. Right now, the taxpayer is out. We have to cut our losses in the knowledge that B & I has a certain future, that the employees have certain terms and agreements laid down before the takeover occurs and in the knowledge that we will be helping the Irish Continental Group to become an even stronger, viable company, a strategic company, all ships registered under the Irish flag.

The Irish Continental Group has done well and I cannot but wish them well in their purchase. The figure of £8.5 million appears to be good value, even adding the £30 million they have committed to capital investment. There is, no doubt, however, that it is the best price available now. I would like to know, as I have said, why the hurry and, given that we are writing off the debt of £36 million, why could the sale not have been postponed for some years so that the taxpayer would have got greater value for money? We have to be realists, given the level of interest in the international shipping market generally, in B & I, and given that one option open to consideration was indeed liquidation. It is a sobering through that that was one of the options Stokes Kennedy Crowley had to consider. At this time the sale represents the best prospects for B & I management and staff and for ensuring a secure future leading to the establishment of a very strong Irish shipping company by enhancing the Irish Continental Group's fleet. I wish all concerned well.

Mr. Mooney

In the spirit of goodwill, I extend to Senator Doyle the compliments of the season, a very happy Christmas to her and her family. I think we are both at one in general terms in our approach to this important legislation. In fact, I would regard it as historic.

Irish Governments have traditionally been involved in shipping since the foundation of the State and this is now, for the first time, a clean break between the State and the private sector, and specifically shipping. The Minister has outlined in great detail to the House the background to B & I. The company has been a troubled one in recent years. In fact it had not made a profit from 1965 to 1988 and throughout that period it was relying on State subventions to survive.

I do not think anybody would question the Government's continuing commitment to the protection of our shipping routes and I share Senator Doyle's view that the most significant event of the last week has been the agreement between the Irish Congress of Trade Unions and the Minister for the orderly and smooth transition from State to the private sector of the B & I Line. It is a tribute to the Minister's considerable abilities as a negotiator, which sometimes I think are underestimated, that throughout this entire episode he has shown a remarkable ability to placate all sides and avoid potential hazards. Listening to the Minister giving the background to this legislation, it is obvious that it was fraught with difficulties.

Since this legislation was introduced I have reflected on a period in the early eighties when Irish Shipping was taken off the high seas in a precipitate manner and I wonder, if the present Minister had been in charge at that time, whether we would have seen the demise of Irish Shipping.

Mrs. Doyle

Deputy Haughey promised to reinstate it when he got back into office and the ex-Irish Shipping workers are still waiting.

Mr. Norris

Hear, hear. It is about time someone raised that.

Mrs. Doyle

We will give the Senator Irish Shipping if he wants it.

Mr. Mooney

The reason I raised the question of Irish Shipping is that one of the ships in question, the Irish Spruce, was in Marseilles at the time. There were three ships on the high seas when the Government liquidated the company. Marseilles happens to be the residence of my brother and he helped many of the crew of the Irish Spruce who were detained in the harbour at Marseilles for 18 months to two years. I visited the staff on that ship on many occasions. I cannot help but reflect on the shame and embarrassment I, as an Irishman, felt to see pieces of paper stuck on the mast of one of the most superbly fitted ships in the Irish line at that time, the Irish Spruce, and, subsequently, to watch these fine men walk up and down outside this House as successive Governments ignored their legitimate rights, which have not yet been resolved.

Mrs. Doyle

They deserve to be told the truth.

Mr. Mooney

It was a shameful episode that did not reflect well on either Government.

Mr. Norris

Well said.

Mr. Mooney

I would not defend the decision that was taken at the time or the attitude of the Government in relation to the treatment of the Irish Shipping workers. This is an opportunity to put on the record my own annoyance — I will leave it at that — at the manner in which they were treated. The Minister and his Department have acted in a most responsible and mature way. Had he been in power at that time would the story of Irish Shipping have been different? Would it have had a more pleasant outcome? It is obvious that had B & I been allowed to continue along the lines on which it was going, it too may have been faced with liquidation. It too may have found that the Government of the day were unable to sustain the enormous burden on the Exchequer. Senator Doyle made the point that in the context of the consultant's report it was one of the options considered and it is also in the Minister's statement.

The recent history of shipping has not been a happy one. The decision to sell the B & I Line to the Irish Continental Group is not just significant but one of the most acceptable decisions that has been made by a Government in recent times in the disposal of one of their assets —a dubious asset in financial terms. I wish to put on record the tremendous sacrifice and commitment shown by the B & I workers over the last few years in accepting rationalisation plans and hoping against hope that the company would continue to be viable and their jobs protected. The fact that it will operate under the Irish flag and that it is a company that has become expert in ferry services is extremely significant.

The Minister referred to the fact that it would provide healthy competition on the main corridor, Dublin-Holyhead, and on the southern corridor. I bow to Senator Doyle's expertise in that area since she lives there, although I have had the pleasure of being in Rosslare on many occasions. I have a brother-in-law who works in the Customs service there.

Mrs. Doyle

Will he be surplus to requirements in 1993?

Mr. Mooney

I hope not. Rosslare is a superb facility. However, the takeover by Stena of Sealink has not been good for either the company or, more importantly, the consumer. I have followed the fortunes of the Stena Line over the last couple of years. As recently as last month reports indicated that the holding company, which is a family-owned concern, are in financial difficulties. One of the reasons is that they paid too much for Sealink and that the debt burden is proving to be difficult. I hope they will solve their problems, because it would be horrendous if Stena had to offload Sealink or that Sealink's trading activities would be in doubt. It would be appalling for this country because of our heavy reliance on sea routes for trading, commercial and tourist traffic.

The fact that Irish Ferries are now going to take over this line is an important development because they have carved out of an extremely difficult route, Ireland-France, a successful, profitable operation.

Criticisms have been levelled at Stena that because of their limited experience in Sweden operating short haul ferries and because the environment for ferries in northern Europe is different to the environment in these islands, they have miscalculated the business out there. To be more specific, I had occasion to travel on one of the Stena Line, Sealink routes, Dublin-Holyhead, about two months ago. I consciously made the decision to take my wife and family in order to experience at first hand travelling on the ferry with a young family. Our experience tallied to a great extent with the criticisms that have been levied at Stena's refurbishment of the boat supplying the Irish route. They made the point that as a result of the change in seating and meal arrangements, based on Stena's experience in the northern hemisphere, they had created less comfort for passengers. For example, people travelling from Dublin to Holyhead and from Rosslare to Pembroke have been accustomed to comfortable seating. There were areas closed off from the food and leisure areas where one could relax in comfort. The fery we travelled on catered more for leisure activities. It was as if we were expected to eat, drink, play the slot machines or shop. There were open areas and there were very few places where one could take one's family and just enjoy the trip across the Irish Sea.

There has been a subtle change in the shipping environment between Ireland and Britain which is reflected in a drop in passenger numbers on the Sealink routes. This is the result of what I believe is misguided refurbishment. I urge Stena to look again at the manner in which they operate shipping on the Irish-British routes and recognise that what is acceptable on the Swedish routes differs greatly from what is acceptable to Irish, British and west European travellers. I do not make this point lightly. I believe this is an important commercial consideration. It is equally important that the B & I Line is being sold to an Irish company who has experience and expertise operating ferries the way Irish, British and French people like. That augurs well for the future. The Minister made the point on several occasions that the Government's view is that selling to the Irish Continental Group ensures a strong strategic shipping line under the Irish flag.

It is interesting that Senator Doyle raised the privatisation of B & I. I thought about this also. I do not believe the Government should be involved in shipping at all. If one looks at the operation of shipping companies not only in these islands but throughout Europe one sees and that P & O Line is a private company. Even in Ireland, Aran Ferry company is private as is the Cork-Swansea Ferry.

Mrs. Doyle

Why should they be involved in sugar, pensions and so on?

Mr. Mooney

The Senator made the point that the Government should have wiped out the debt, held on to B & I, allowed it to operate profitably and then sold the golden share in four or five years. The Minister's agreement with the ICTU in relation to this states that "it will seek to have at all times sufficient ships on the Irish register which could be utilised in times of emergency." It also states that it will continue to pursue vigorously with the European Commission. Ireland's case for the funding of improvements in access transport services. The ICG have confirmed that their plans for B & I over the next five years include the sourcing of an improved vessel to replace the m.v. Munster on the Rosslare-Pembroke service, the upgrading of facilities throughout B & I, the replacement of B & I container ships, the provision of long term sustainable employment in B & I and the provision of extra capacity in the m.v. Leinster. They have indicated that they will spend upwards of £30 million over the next four to five years on the necessary refurbishment and improvement of the services.

I hardly think that B & I on the basis of its history, even its recent acceptable financial history of a small trading profit, would have the necessary funding to develop its services along those lines. That may have been the thinking of the Government. I felt that if the Government were to hold on the position would deteriorate further financially, but we will have to accept whatever the Minister says.

I thought this would be an ideal opportunity to raise extra money but last year we had to vote for substantial Exchequer funding to keep B & I afloat, even at a time when, on paper, it was trading profitably.

Mrs. Doyle

The point about the golden share is separate to that.

Mr. Mooney

The big advantage is that there will be more investment in the B & I Line. Statistics for the last 12 or 18 months have shown that, as a result of increased aircraft charges between these two countries, for the first time in many years there was a switch to the ferries of tourist traffic primarily. More and more people were using the ferries between Ireland and Britain. That is a compliment to the marketing expertise of both B & I and Sealink. I would not want to diminish their efforts in that area, but there will be difficulty in expanding the services between Ireland and Britain if Stena continues its present policy in relation to ferry services between Britain and Ireland.

The Irish Continental Group will make great progress in that area because they have enormous expertise. I welcome the commitment outlined in their agreement with the Government and B & I that they will not only take over this company but they will invest substantial amounts of money in it. I have doubt that, over the next number of years, B & I, within the Irish Continental Group, will become extremely profitable and viable.

It is important that we should all record our appreciation for the efforts of both sides in ensuring that the staff of B & I are satisfied with this arrangement. I understand the B & I workforce will be reduced as a result of this takeover, and that this was accepted. It is an inevitability which none of us welcomes. I hope that when the legislation is in place and the Irish Continental Group takeover B & I, the redundancies which will be agreed between the unions and the new owners will be dealt with as sensitively as possible. Nobody likes to see jobs being lost. We all shout about the appalling unemployment but let us hope these redundancies will be voluntary and that they will be treated as sensitively as possible.

The Minister stated that the Government will continue to pursue vigorously with the European Commission Ireland's case for funding improvements in access transport services. In the pre-Maastricht debate it was generally agreed on all sides that the emphasis Ireland would place on its negotiations in Maastricht would be on a more direct transfer of funds, cohesion if you like, from the stronger countries to the weaker countries. The Government were forthright and strongly committed in their negotiations in Maastricht along with their other partners Spain, Portugal and Greece to ensure that the bloc of four nations would receive a greater transfer of funds.

With the opening of the Channel Tunnel in 1994 this country will face enormous economic difficulties unless the shipping lanes between Ireland and Britain are further developed and the transport infrastructure throughout the United Kingdom is developed. I ask the Minister to pursue this vigorously with his British colleagues because there is not much point in having efficient services between Ireland and Britain if the infrastructure is not in place to send goods speedily on their way through England and on to the Continent. I do not want to sound like a prophet of doom but we will have extremely serious difficulties post-1994 unless there is recognition at European level that this country is a peripheral nation. We will be the only island nation in the EC and I cannot emphasise that strongly enough. It is extremely important to the future economic wellbeing of this country. I commend the Bill to the House.

Mr. Norris

It would be an impertinence to be too critical of the provisions in the Bill considering the agreement reached between all parties during the week. I do not think we can intervene in a harsh or a shrill way. The B & I Line is part of this country. It is part of my own experience. I go back nearly 40 years and I recall that as children we used to be taken to Sir John Rogerson's Quay and it was a great event of a summer's evening to watch the B & I boat going out. As a student, part of my experience was going to England to pick peas and we travelled on the old B & I boat. It was not all that comfortable.

My most recent experience was when I was doing a charity walk for manic depression, for a group called ALONE, and we walked about five miles around Dublin. They provided us with a sheet of about 100 questions about old Dublin. Three weeks later I was telephoned to say I was the only one who got them all right. I had won first prize which consisted of a return ticket for two on B & I to Liverpool. I was very surprised at the improvements which had been made. It had quite luxurious accommodation compared to what I remembered. The cabins were very comfortable with bunks and colour television and all the rest of it. There were facilities to make one's own coffee. It is a service that many Dubliners and people from the country will have used in various ways over many years and I will be sorry to see it disappear entirely.

I welcome the involvement of Irish Continental Lines. They are a strong, very professional group of companies. I have also had occasion to use their ferries. Senator Mooney rightly reminded us that we are, in fact, fast approaching a situation where we will be the only island nation in Europe and the implications of the Channel Tunnel are clearly there. However, curiously enough, we are not really a particularly maritime nation. We are aware of the fact that we are an island and are surrounded by the sea but the general attitude, far from having a real commitment to the role of the seafaring life in the life of our nation or to the importance of shipping or anything else, seems to be that echoed by Dominic Behan in his song where he said:

The sea, oh the sea, is grá gheal mo chroí, long may it roll between England and me;

its a sure guarantee that one day we'll be free, thank God we're surrounded by water.

I do not believe there has been a commitment to the development and maintenance of essential shipping lines for this country on the part of any Government. I welcome the Minister's commitment to maintain and improve services and ensure competition in sea transport between Ireland and the United Kingdom. It would not worry me greatly if we continue State participation because it is obvious there will be continuing State participation in certain circumstances. We simply cannot afford to allow the network of sea routes to wither away or pass completely out of domestic control.

If any new company formed by this legislation subsequently got into trouble the State would have to intervene again. Let us be perfectly clear: there is and must be a continuing State interest, if not a direct State financial role, in the maintenance of Irish shipping lanes and services because it is part of our national interest. I am sure the Minister would agree with me that if there were a problem down the road this or any other Government would feel obliged, as a matter of national responsibility, to get involved and ensure that shipping routes were properly and adequately maintained and serviced. It would not greatly worry me if there were continuing State involvement. I am not an ideologue on that matter.

If taxpayers are going to inject £35 million into this new or remodelled venture, then they are entitled to know what return or safeguards there are for this kind of investment. For that reason, I with many other people who have spoken, will be interested in the Government's response on the question of the golden share. It is a very substantial sum of money at an economically gloomy period and when people are being asked to tighten their belt and so on. They are entitled to wonder why we do not have a golden share.

I commend my colleague, Senator Mooney, for his very appropriate and timely reference to Irish Shipping. The morale of the people involved must have taken a considerable knock. I appeal to the Minister to consider reviewing this matter over the Christmas period. Senator Mooney referred to the fact that repeatedly over the years we have seen people who gave distinguished and valid service to this nation, some of them over a period of 40 years, dressed in their uniforms — they are now becoming elderly people — trudging up and down outside the gates of Leinster House. They have not received any real effective response from any Government. I and others attempted to raise this matter on the Adjournment and we were told, speciously I believe, that it was sub-judice. If there is a sense of honour and of honourable obligation towards those involved in shipping who have given noble service to this country, then the Minister should give, at least at some stage, a clear response to them. I am extremely glad Senator Mooney raised this and I understand it is supported by most groups in this House.

I would like to point out to the Minister, not in a confrontational way because I know he is a compassionate man who is interested in these areas, that when in Opposition, Fianna Fáil put down a motion in June 1985 which called on the Government to pay adequate compensation to the staff of Irish Shipping of six weeks salary per year of service and restore the pensions of all former Irish Shipping staff to their pre-liquidation level. So that the Minister will know that there is general support within the present Government for this or at least there was in 1985, I can tell him that the then Minister for the Marine, Deputy Wilson, said that he refused to take seriously the Government's excuse that the legal and financial subtleties involved were beyond the comprehension of the average person and that this precluded any fair settlement.

The Minister, Deputy Wilson, said on the record of the Dáil: "That gets under my skin completely. This is a House that deals with legislation. Here is the place where a Bill could be brought into nurture the sensitivities or get rid of whatever we have to do with these sensitivities. This is the House that should do it." I should like to emphasise how important it is not merely for the workers who have lost their jobs and careers that the State should be just to these people. That is of importance to other employees in State companies and the private sector. They should take note of what can only be regarded as savage treatment by the State of employees with years of service.

I wish to give two further supports to this. One is from Deputy Bertie Ahern, now Minister for Finance and until recently Minister for Labour: "People with a pension of £75 ended up with nothing. Those with £925 now have £140. People with over £200 now have under £30 and those who had £100 now have under £10. Where is the justice in that?" Finally Deputy Albert Reynolds who supported the Fianna Fáil motion said: "This act will never be forgiven by the generation of today or those who come after. This Government will be written into our history books as one which reneged on national responsibilities, gave this country a bad name abroad and above all took away pride in serving under out national flag." I am not going to be tedious and continue with these quotations but I mention them to indicate to the Minister that I accept that this is peripheral to the case but it is analogous. Should it come up for discussion with his ministerial colleagues, as I hope it will, he may have the confidence to quote in support of a humane position with which I am convinced the Minister would sympathise, even if he finds himself constrained to some degree. He will, I am sure, like to feel that he has the support, on record, of a number of senior Members of his party, including some current Cabinet members with responsibility in areas such as Finance.

It would be over-positive for me to say I welcome this Bill and it is not appropriate for me to say that because it arises from negative circumstances within the shipping industry. I commend the Minister, however, for the way he has dealt with the matter. I am pleased that there has been agreement between trade unions, management and Government and my principal concern with the Bill is a seeming lack of accountability to Government through the absence of the golden share. I look forward to the Minister's response on that matter. I urge the Minister, even though it is not directly part of this morning's consideration and taking into account, to my great pleasure and perhaps a little to my surprise, that this matter was raised originally from the Government benches. I congratulate Senator Mooney again on having done so; it was my principal intention in coming here this morning to speak on Irish Shipping. I hope the Minister will find it in his heart to examine this and to come out in the New Year perhaps with some positive statements for these people who have given service to the nation and have been turned off in a quite unacceptable manner. I am not accusing this Government alone; I am accusing all parties and all of us in the Oireachtas for not having made sufficient song and dance to ensure that our fellow citizens were decently treated in this matter.

Mr. Mooney

Sorry for stealing the Senator's thunder on this matter.

Mr. Norris

I am glad he did because his eloquence is perhaps more persuasive than my own few words and certainly he is firing at the Government from a much more advantageous angle than I am.

Mr. Mooney

I could not follow that, Senator.

Mr. Dardis

On behalf of the Progressive Democrats I welcome this Bill and we will be supporting it. The Minister, both here this morning, and in the Dáil debate which I have read, outlined in considerable detail the history of B & I since its acquisition by the State in 1965 and there is no need for me or for anybody else to repeat those facts, other than to say that it appears that successive Governments have made every effort to keep the company afloat — which is the proper word in the circumstances. Whether their efforts were well founded is another matter and is open to question. The most pertinent fact revealed by the Minister is that total Exchequer equity in B & I amounted to £106 million, of which £53 million has been paid since 1985. So the Irish taxpayer has been footing the Bill to keep the company going. The Minister outlined equity injections of £6.2 million, £4.8 million and £6 million in 1988, 1989 and 1990 respectively. As we all know there have been various plans of action, of rescue, of refloat and of redevelopment through successive Governments.

I note that the Minister was subjected to criticism for the timing of the legislation; it was suggested that he was being too hasty in introducing it. The opposite could be said. The Minister has been extraordinarily patient and diligent in finding a solution to this problem and if anything he could have been excused for moving earlier than he has done. It has been obvious for some time that the company was not generating enough cash to finance its operations without substantial continuing equity injections from the Exchequer. I realise that its trading performance has improved dramatically and that has been a factor in the Government being able to dispose of it successfully for what I believe to be a reasonable price.

In all the circumstances it must have been quite logical to commission Stokes Kennedy Crowley to advise on the best and the most economic means of terminating Exchequer support for B & I at the earliest possible time with regard to the need for adequate capacity and competition in the provision of passenger and freight shipping services to and from Ireland. It can be argued that there are circumstances where it is appropriate for the Government to intervene to support activities for compelling social or strategic reasons but this is not one of those circumstances. The options put before the Government by Stokes Kennedy Crowley and which the Minister outlined to us were four-fold and the first of these was to maintain the status quo. Any right or even wrong thinking person would realise that that was not a viable option in any sense.

The second option was the redevelopment of the company with major capital investment and that would also have been entirely inappropriate. We would then be throwing good taxpayers' money after bad. One of the things that Government might learn from commerce is the rule that one cuts one's losses and runs. As Senator Doyle would know, when one has a horse in a bad market it is sometimes better to sell the horse and take the money than live horse and get grass.

The third option was liquidation and that would have created enormous disruption and social implications and it is quite probable that the return to the Exchequer would have been disappointing. That brings me to the fourth option, the sale, which option was agreed to. That is the option we are here to address and it was the proper option to take. The matter has been going on for nearly a year and and there has been plenty of time for all parties involved to resolve it, to come to a conclusion and from that point of view I believe the Minister has been sensitive to the needs of the community at large and of those within the company and it is now time to proceed. The conclusion of the assessment which the Government agreed to and which is probably the most centrally important sentence in what the Minister said to the Dáil and here this morning is that B & I should be sold to the highest bidder. That is the bottom line and it was quite right for the Government to adopt that line when it was decided to dispose of the company. It is an extremely important conclusion and one which reflects sound commercial common sense on the part of the Government.

A bid of £8.5 million was made by ICG, a company with substantial cash and other resources and importantly, a commitment to carrying the Irish flag. ICG had a cash surplus of £9.5 million in 1991 and it has proposals to invest £32 million over the next five years. In those circumstances, that appears to me to have been a better offer than the one which came from the management and staff buy-out for £5 million. Had that latter offer been accepted there were possible implications relating to the Irish flag; maybe we would have encountered Danish control of our assets.

I believe that one of the options was to sell the Leinster and to lease it back. The Minister can correct me if that is wrong but releasing cash from the sale of assets for working capital requirements is a questionable practice particularly in circumstances where it would appear that that cash would have been gobbled up in wage increases and so on. That would not seem to make sound commercial sense.

I realise that there is a substantial write off of the order of £35/£36 million involved but to continue as we are going would have increased the level of write offs and thrown good money after bad. The Minister is to be congratulated on the agreement achieved between unions, management and Government which, by any standards, was a good day's work. It has made what might otherwise have been difficult legislation easier to come to terms with. Having read what Deputy Yates had to say in the Dáil I note that Senator Doyle's contribution is in many respects quite different from that earlier contribution.

There have been comments about the role of management and staff in B & I and certain plaudits. I sympathise with the human aspect of what is taking place and with the people who have been marching outside Leinster House. I identify with their human predicament. Nevertheless we must state explicitly that many of the problems which befell this company were the result of poor management and poor industrial relations. The B & I had 877 permanent employees compared to 250 employees in Irish Continental Group. I am told that there were almost more company cars than managers in the B & I. I hope I am wrong. It is quite clear that administration in that company was top heavy; and administration geared to a workforce of some 2,000 people is now looking after a workforce of 877 people.

I realise that there are proposals for voluntary redundancies and I am glad they will be voluntary, but my information is that of 230 to 250 redundancies anticipated, the bulk of those will come from administration and management and only about 40 will come from people at sea. That indicates the top heavy nature of the company being taken over, where administration and management do not focus on cost centres or on modern management practices.

As to practices in general within this sector, several references have been made to the need for competition on the Irish sea and I subscribe to that view. I sometimes think we have not had such competition in the past. According to what I know of practices in Dublin Port, if a B & I ship is going to England with a container lorry costing about £350 one way, the B & I gets about £200 of that £350 for shipping the container, the Dublin Port and Docks Board get £100 but Liverpool, which does no less at the other end than is done at this end, gets £50, Rosslare would get £38 and Larne even less.

We have to ask ourselves fundamental questions about the practices in operation in Dublin port and the effect they are having on the competitiveness of people trying to contribute to the country's export effort. I cannot understand how it can make sense for somebody located in Carlow or Kildare to drive a truck to Larne, bring it across to Britain and drive it down to Liverpool more cheaply than by going directly. That does not seem to make sense and we must ask ourselves how competitive the business is.

I recall seeing a document some years ago concerning shipping charges from Rosslare to Fishguard or Holyhead at a time when B & I and Sealink were on that route. I saw freight charges guoted in a particular week by one company and lo and behold, the following week the other company issued the same freight charges. That is not competition and I imagine that under present legislation that type of activity would be illegal. We have to ask ourselves serious questions about the degree of competition prevailing in the past and I am confident that we will have true and proper competition in the future.

Several references have been made to the golden share, that the Government should have a certain percentage holding guaranteeing certain rights and so on. Analogies have been drawn to Greencore or Irish Life. The B & I Line is a completely different kettle of fish. Circumstances are different and one of the reasons that the golden share is not required is the agreement entered into by the Minister, unions and the management.

One of the problems with State involvement in a company of this nature is that it makes for weak shareholding. Part of the problem in the past was Government shareholding; it did not have the political ability or capability to resist some demands being made on it. We have to be explicit and say that at times threats almost amounting to blackmail were made at the height of the tourist season or coming up to Christmas when the Government did not have choices in the matter. It had an economic choice but that was not the same as the political choice. Perhaps to our discredit we make the political choice at times when we should make the economic choice.

The employees' rights are now guaranteed which would be one of the effects of the golden share. A commitment has been given on pensions so the golden share argument is not nearly as valid as it might have been a week ago. Even then I would have had reservations about it because I do not see that this particular case is comparable to Greencore or Irish Life. Greencore involved one industry, sugar processing, a central important industry. There was no other way than the golden share and that is why it was right for the Government to maintain involvement in it.

Senator Mooney referred, to the Single Market and to what might happen when the channel tunnel is built. In the Maastricht agreement there are two elements under the social and cohesion arrangements which cover environmental matters, transport infrastructure and so on. Perhaps if I were in ICG looking at the acquisition of B & I, I might be saying to myself that three or four years down the road there might be large sums of money available to me under some of these funds to help get our goods to mainland Europe at a price not disadvantageous compared to someone using the channel tunnel or already on mainland Europe. As part of the cohesion argument, we must insist that we are not disadvantaged in transport terms because we are a peripheral nation. I am sure that will work to the advantage of this new company.

I wish Irish Continental Group well in their venture and hope it is successful. I think it is a high risk venture and shows a degree of courage on their part. It was a commercial decision but made in the national interest and I look forward to a successful future for that company. It may ensure that people travelling to and from Ireland will be able to do so cheaply and in comfort and that people exporting by freight will be able to do so at competitive rates. Senator Norris gave a nostalgic trip around the Irish Sea and said "Thank God we're surrounded by water". I had not realised Senator Norris was as nationalistic or as republican as that song would suggest and perhaps in this particular circumstance, it is a bit of the devil that we are surrounded by water. We might not have some of the problems we have in this respect if we were not surrounded by water.

Mr. Harte

I would like to pre-empt some of the observations I want to make by saying that I am pleased that a satisfactory arrangement has been arrived at within the past few days and to admit that that lessens greatly Labour Party opposition to this Bill. It weakens the arguments.

I am very sorry to say to Senator John Dardis that every time I hear people talking about competition and the problems it is going to solve, I cannot understand how it will solve them. To me — and I said this 40 years ago and I still say it — competition is war. If people could get all the business for themselves they would put the other fellow out of business; that is what competition means. All we have to do is look for the evidence. Anyone who listens to the Dunnes' advertisement ordering Quinnsworth to get out of town on the next stage will know that this is war. I could go on about the supermarket side but I only want to give an indication of what they are at. They would not be fussy about putting somebody out of business and they have no social concern about jobs. I still have a bit of a sour over that and I do not mind admitting it.

Like Senator Dardis, I find it is not easy to leave my biases outside the door. My biases are evident in this respect. At a time when B & I were earning annual profits of over £2 million, a big turnaround from losses over the period 1981-87, the Minister, it appears, chose to turn against a company making an offer that could have been accepted to give the opportunity to another company when the projected profit for B & I for 1992 was in the region of £4 million, with likely prospects of further improvement. At a time when the workers in the B & I had contributed considerably to changing a very big loss into a substantial gain, the Minister turned against them. At a time when there was evidence of a major increase in the individual productivity level of all workers in the B & I, the Minister turned against them. At a time when B & I workers had been living with the effects of pay freezes in the interests of greater efficiency, the Minister turned against them.

Having regard to those observations, one is entitled to ask what must workers do to convince Ministers that their contributions to major turnarounds in profits, productivity and accepted pay freezes should not lead them into a situation almost equal to liquidisation and that, it seems is what happened. They were also left in a position where they had grave doubts about the Minister treating their bid seriously.

Having asked for sacrifices from B & I workers and given that workers responded positively to those earlier pleas from the Minister made long before the talks, the Minister pleaded for efficiency in B & I and we heard criticisms of administration, etc. That efficiency came after the Minister asked for sacrifices in the interests of saving the company. The workers then found that not only had a substantial number of them been shafted, but the Minister makes what could be described as a substantial gift to another company who played no role in bringing about greater efficiency in B & I. The gift referred to is the sale for £8 million, having regard to the writeoff of the debts of £36 million. Perhaps the Minister might explain this to me and also the handing over of a £14 million surplus in the B & I pension fund.

People in the B & I made sacrifices for greater individual productivity to bring about profitability and it looks like a poor return for this major feat of co-operation to make a gift to a private company. This makes me wonder if the Minister is not blinded by his own obsession with the value of privatisation.

I have no ideology about privatisation; I believe that everything must be taken on its merits. From the time the Minister was in the Seanad with me, he has had an obsession with the value of privatisation. I do not refute that every case must be looked at on its merits; it is not one way traffic. The best way the Minister could have tested the ice with ICG would have been to test the value of it. If he was not going to write off the debts, they would not have been very interested; we would not have got much of a response there.

There is also some questions about guarantees. For example, will the probable claim outstanding against the B & I arising out of the use of facilities in Pembroke result in compensation being paid by the B & I or what is the position? Will they be stuck with resolving this situation or is there some other arrangement in the Bill?

The other question is, what happened to the Danish companies who were part of the original proposal? Were they forced to withdraw? Was this due to lack of time to consider the structure of the equity and loan finance? My understanding of the position is that the AIB Corporate Finance were confident of the viability of the proposals they were making, so much so that they were prepared to back the Bill. Those are some of the things that are causing me concern.

Despite the fact that an agreement was arrived at with the workers, many points are still undecided. They want to know what assurances exist and that the necessary investment will be made available for fleet replacement and modernisation. They want assurances that safety will not become a secondary consideration in an under-capitalised, private commercial operation. Those are matters of concern to the workers.

The other reason they did not fully understand what the Minister was doing was the fact that the worker-directors of the B & I had to read in the newspapers of the Minister's decision to hand over the company. Where were the consultations with the people who had given their co-operation and who had turned the company around? Some trade union people worked day and night to bring forward the management-worker buyout proposals. They were equally shattered about not getting information at the right time. In essence the attitude of the workers to the approach adopted in this case, given the fact that they had cooperated fully in the effort to turn the company around, was one of annoyance. Quite understandably, they felt aggrieved.

The job losses seem to have been shrugged off by the Minister. I have not heard any explanation about where they will be and I do not think I will get an explanation. Some years ago I was representing the Guinness workers. As far back as the late 1960s we started to recommend co-operation to the Guinness workers. That needed to be done. We had to do it if we wanted to keep the Guinness brewery in Dublin and to keep control of the export market. Experts were brought over from Holland, a country about the size of Munster with 100 per cent employment rate. They met in Red Island in Skerries in Mr. Lemass's time. I even sat down at the table with the present Taoiseach at one of those meetings. The view at that time was that in the long term all the co-operation would, in a general way, lead to the creation of more jobs.

Let me remind the House that between ancillary workers and seasonal workers there were somewhere in the region of about 4,500 people in Guinness in Dublin. Now you could walk into Guinness and it is like a desert. No jobs were created. They may have been created in one or two subsidiary companies. The jobs are not there. The jobs for father, son and the family are gone. Other people who had worked in the Army or the British army were no longer taken on. With all this co-operation and working to greater productivity levels, putting in more effort and accepting a pay freeze, how do we tell people that jobs will materialise when that will not happen? The argument could go the other way from the Government's side. In fact, jobs could be created. However, the position is that not enough jobs are being created to absorb the number of redundancies or to employ people who are coming off the land or returning from abroad. These are serious concerns for the workers. Bearing in mind that there are anything up to 270,000 people on the live register one is inclined to get a bit cynical about talk about productivity levels, greater efficiency, and so on. It would be great if it led somewhere.

For years I was a great advocate of co-operation. I stood up and convinced most of the workers in Guinness to row in behind this development. I did it on my own at National Executive level but I am beginning to get a bit cynical about the whole thing now. At this stage, 30 or 35 years later, there are 270,000 people on the live register and this is aggravated by another 100 people being thrown on to the scrap-heap in a hand-over of a company. These are all matters of concern to workers when they are trying to make an assessment of how they should give their co-operation, on what basis, to what degree and for what result.

Another matter that was probably worrying some of the workers in the B & I was the fact that we are now talking about 100 more people claiming social welfare benefit and no longer paying income tax. Somebody will have to help those people to exist on this reduced income. The lay-off of workers is always very hard to take. I accept that we are an island nation, that we are on the periphery of Europe, and that there are difficulties. Senator Dardis mentioned the inefficiencies in B & I and said they had to be remedied. I agree with that. Where there are inefficiencies in any State company they will have to be eradicated.

Because of the decision to sell B & I to the ICG Group we are left with no commercial enterprise under State control in the sea transport between Ireland and Europe. I am not in the business of putting down amendments and it is not my intention to put down an amendment. I accept the way the workers have dealt with the matter and I am not going to get awkward about the matter. However, the fact that they have made an agreement does not mean that the workers have forgotten about the co-operation they gave and the sacrifices they made with regard to pay freezes and so on. They are certainly entitled to ask whether this is their reward.

I say to the Minister that I hope this works but I have a great fear he will be back to us in five years' time looking for money for this poor unfortunate ICG company. We will say: "Yes, it is a good case and they must get money". There will be an explanation for it on that day. New reasons will be found and they will get the money. I offer the best of luck to the workers and I hope something can be done for the 100 people who have been laid off.

Mr. Foley

The purpose of this Bill is to provide for matters connected with the sale of the B & I Line. At the outset, I would like to congratulate Senator Doyle on her very positive and excellent contribution on the legislation. It differs somewhat from the contributions of her colleagues in the other House on the same Bill.

The sale of B & I to ICG for £8.5 million finally breaks a link between the State and the shipping line which goes back to the early 1960s. In 1965 the B & I line was purchased by the State for approximately £3.5 million, which is equivalent to £34.4 million in 1991 prices. Over the years it is estimated that in excess of £200 million of taxpayers' money has been ploughed into the company. Heavy losses were accrued by the company in the 1980s but since 1988 B & I has shown profit before interest charges as follows: in 1988, there was £1.76 million; in 1989, £1.95 million; 1991, £0.9 million. The estimated profit for the current year is in excess of £2.4 million.

The Minister has been subjected to considerable criticism with regard to the B & I sale. I wish to avail of this opportunity to congratulate the Minister, Deputy Brennan, for the positive approach he has taken since assuming his portfolio. He has always looked at all options available to him and with the B & I he has certainly looked at all the outlets in this case in order to arrive at the best decision for all concerned.

For the record, in August 1990 the Minister commissioned Stokes Kennedy Crowley Finance Limited to advise him on the best and most economic means of terminating Exchequer support for the B & I. Having regard to the need for adequate capacity and competition in the provision of passage and freight shipping services to and from Ireland, the report from the Stokes Kennedy Crowley Corporate Finance Limited came to almost the same conclusions as the report from the board of the B & I on the best options that were available to meet the objectives as outlined.

The consultants examined the feasibility of four key options for the future of the company. These were, continuation of the status quo, redevelopment with major capital investment, liquidation, or sale of the company. The feasibility and financial implications of each of these options was assessed by the consultants and they identified the sale of the B & I as the most favourable option. They were of the opinion that this would have a positive effect on access transport services in a situation where the purchaser would bring financial and operational strength to the company resulting in greater competition on the Irish Sea routes. They also believed that a sale would secure the future employment of the majority of the company's employees, and this is most important as the workers have shown a very positive attitude and have made a major contribution in turning the B & I into a trading profit situation. They are to be congratulated for this.

The Government considered the consultant's report in September 1990 and decided that the consultants should be requested to explore the level of interest which existed in the international shipping market for the acquisition of B & I. Stokes Kennedy and Crowley then decided to have detailed discussions with a number of interested parties. A prerequisite of all parties was that the State would assume responsibility for most of the company's substantial long term debt because it quickly became clear that there was no prospect of effecting a sale unless the Government agreed to take over the company's debt. A significant reduction in the workforce was an integral part of each of the proposals. This was most disappointing in view of the major input of the workers to create a profit situation within the B & I.

Before finalising their recommendations, Stokes Kennedy Crowley also had discussions with the management of the B & I and had submitted a proposal for a staff-management buy out of the company. These discussions were held specifically at the Minister's request. Having assessed all the offers made by the interested parties, the consultants strongly recommended that the Government should pursue the offer made by the Irish Continental Group which trades as Irish Ferries. In their view this would offer a firm prospect of ensuring a strong shipping line under the Irish flag of a sufficient scale to compete internationally.

The Minister states he is satisfied that the sale to the Irish Continental Group represents the best prospect for the future development of the B & I. It will create a strong shipping line with substantial long term benefits, a proven track record and the ability to make the necessary investment in the future of the combined entity. In this regard, ICG are committed to investing more than £30 million in the B & I over the next five years.

The Minister also sees the main additional benefits which can be expected to accrue from the acquisition of B & I by ICG as follows:

The maintenance of vital Irish shipping maritime skills;

the maintenance and development of critical shipping routes vital for tourism and national transport needs;

the creation of a platform for an increase in capacity and improvements in the quality of services;

competitive market-led fare policies;

The overall enhancement of the B & I services and, in particular, the development of its central corridor and Southern Corridor services;

removal of the requirement for ongoing Exchequer funding;

the maintenance of B & I ships in the Irish register.

These benefits will make a substantial contribution to employment creation both directly and indirectly. No doubt the sale will lead to the creation of a strong Irish shipping company with the potential to alleviate the twin evils of under-capacity and high excess costs. It will also preserve competition which is a vital ingredient in achieving these objectives. The provision of a modern, efficient and competitive access transport network, integrated as far as possible with the rest of the European Community's network, is of vital concern to the Irish economy.

The Minister also states that the Irish Congress of Trade Unions and the B & I group of unions acknowledge his view that the acquisition is in the best long term interest of B & I, its employees and customers and also acknowledge his view that it will lead to the creation of an enlarged Irish-owned shipping enterprise with the resources to develop and provide an enhanced level of services to Irish tourism and export trade.

I wish to seek an assurance from the Minister that Cork-Swansea Ferries will not now be at a disadvantage as a result of the sale of the B & I Line to the Irish Continental Group. They have secured a very good deal from the Minister as the Government assume responsibility for loan debts of approximately £36 million. This, in fact, can be termed a grant to ICG.

The Minister states that the offer of ICG represents the best deal in the national interests. As I have already pointed out, Swansea-Cork Ferries are also an Irish shipping company and now operate on a profit basis as will be seen from the figures when they are released later this month. The company is operating a ferry service which was abandoned by B & I in 1983 as being uncommercial and later considered non-viable by Irish Ferries when invited by the Minister to manage the service. It is also worth noting that this view was also shared by consultants engaged by the Minister to advise on Government support on the project.

The passenger numbers carried by Cork-Swansea Ferries during the current year are worth noting. From March 1991 to 30 October 1991 they carried a total of 125,000 passengers and 33,000 cars. This is a tremendous achievement. Despite the pessimistic outlook the company is now in profit with very limited Government financial support. The service has made a major contribution to the economy of the south-west region in particular in the area of tourism. The value of tourism is estimated at £1.1 billion and it is estimated that the ferry service contributed in the order of £15 million to £20 million to the economy of the south-west. In a difficult year Cork-Swansea Ferries have contributed to the Government's five year plan objective of doubling tourism numbers.

I appeal to the Minister to recognise the achievement of the company and to provide the financial support sought by them in the form of an £0.5 million repayable loan for cash flow purposes in 1992. I am pleased to be able to say, as a director of the company representing Kerry County Council, that a similar facility provided in 1990 — thanks to the Minister — and again this year, was repaid to the Exchequer within the financial year. This support seems small compared to the £200 million in State funds given to B & I over the years. The south has not been treated fairly in the distribution of Government resources and shipping services. At this time when it can be shown that there is an evident demand for the service and that it can operate on a viable basis, it is opportune that markers are put in place that any future national transport policy must provide for a scheduled ferry service into Cork to cater for the tourism and commercial needs of the south-west region. The moves at EC level to secure funding to help finance new ferries for this country, both in the wake of the Channel Tunnel opening and Single Market, must take into account the proven need for a ferry service into Cork. The Government policy on ferry access on the eastern seaboard, which puts the south and south-west ports at a disadvantage, needs to be reviewed in the light of what has been achieved by the Cork-Swansea Ferries.

In writing off this £36 million debt I ask the Minister what steps he has taken to ensure that ICG will not take advantage in respect of competitive pricing to the detriment of the other ferry companies. Finally, I wish ICG every success in their new venture.

Mr. Staunton

We are addressing this issue of the B & I and I welcome the attendance of the Minister in the House today.

I have no problem whatever with the question of the privatisation of assets in this country. I am not devoutly pro-privatisation or against it. We are a small country and we have to take a very pragmatic view of issues. This is one of them. We are talking about a core transportation issue in the country, talking about the shipping lines from here to Britain and the rest of Europe. Successive Governments have had to protect our national interest by taking a very keen interest in retaining shipping in the country. B & I were originally taken over by the State in 1965 for this very reason — basically, to secure for this country access on the sea routes to the UK for reasons that have to do with a fundamental national interest in the export of industrial goods, the export of cattle and in bringing tourists into this country. It is a vital interest.

In relation to the present proposals, frankly I do not have a hang-up about the price issue. The State commissioned Stokes Kennedy Crowley to look at particular options. Pragmatically, as they pointed out, certain things can be done with the B & I line. The options were, first, to continue the status quo; second, to redevelop with major capital investment from Government sources; third, to liquidate the company; fourth, to sell the company. The conclusions of Stokes Kennedy Crowley, the consultants, were pragmatic and logical. The third option, liquidation, is inconceivable, given the commitment of the Government. All parties in the Oireachtas are committed to keeping the lanes open and to retaining viability and competitiveness with other shipping lines on the Irish Sea.

To continue the status quo, is unrealistic. If the line was to be revamped, new ships would have to be bought and effectively that would mean very substantial capital investment. Such investment is inherent in the second proposal — redevelopment with major capital investment. The conclusion is that, pragmatically, we should seek a buyer for the B & I Line. I have no problem whatever with that.

I have no problem either with the price or writing off the State debt if it is a means to get this company out of the State's tentacles. If it is a means of reducing enormous State investment of funds over the next decade, then it may well be deemed to be a good deal. In 1965 the State took over the B & I for these very fundamental national interests. It gave a brief to the newly formed company at that time that it had to operate on a strictly commercial basis or the State might take drastic action. When we look at the guidelines of the State in 1965 to the company to be strictly commercial we see that what actually happened has been quite the reverse of that. Since 1965 the State has put an injection of £106 million into the shipping line. Of the millions that have gone in from State sources, about £53 million has been given since 1985. That type of expenditure could not continue indefinitely.

There are other issues as well that must be considered. We know the Stena line is the alternative company. I have not recently been travelling on Stena ships, but there are stories that the standard of accommodation and of the food has improved dramatically. I would not be one bit surprised. I do not like having to say it about Irish shipping but their standards have been shoddy and extremely poor. I have travelled a good deal in my life. I have travelled in the Nordic countries and I have frequently been a passenger on the ships that ply between Finland and Sweden and between Norway and Copenhagen and on these lines in the Baltic. Their standards are superb and their prices are low. There has been very heavy traffic on them. This is one of the big successes of the Nordic countries. I know from visits here by people from those countries who brought cars which they shipped from England to Ireland that standards have been poor. Standards are now rising and I welcome the apparent success of the Stena liners.

The worries I would have in relation to what the Minister is proposing stem from Senator Harte's pessimistic view of certain matters. Towards the end of his speech Senator Harte wondered if in five years time the then Minister may be recommending to the Oireachtas that we bail out Irish Continental Lines. The Minister then may say it is fundamental to the Irish interests that we retain this passenger traffic and that we must retain the shipping capacity in order to export goods.

I hope the Minister and his colleagues are satisfied. My concern would not be, as I said at the outset about the price being paid. That is a relative issue. There are other hugely important issues, such as the capacity of Irish Continental Lines to take on this function. They are effectively taking over a company which is inherently much larger than their own company. They have had very limited experience on short runs. Do they have the capacity to manage the B & I company effectively? How are they going to be in a competitive situation vis-à-vis Stena? I hope the competition on the Irish Sea will lead to a dramatic improvement in standards which can be achieved and is being achieved in other countries. They should be able to do this if survival is the name of the game.

Will the ICG have the financial resources that will be needed? Some people are talking about £30 to £40 million being needed for capital investment over the next five to six years for replacement of large ships. Is the State sufficiently satisfied that this company will have the financial resources available to it and the credibility to raise these sums of money to make this a more viable line? These are the matters I would like the Minister to address in his response to the House.

There is a very strong case where the EC is concerned with the development of the Channel Tunnel which will bring the United Kingdom physically into continental Europe, we will be the only island nation in the EC. Looking at the appalling problems of this country in competing with industrial and other goods in continental Europe, there is a very compelling case for Structural Funds and for regional funding. There is a case for substantial investment in this sector.

Investment in rail transportation in this country is totally inadequate. I travel on the train every week from Westport and I know a lot about the trains in this country and in other countries. The situation is abysmal. There is not a parallel investment or a parallel use of European Community funds in the rail sector to that in the roads sector. Railways are just as much a part of the infrastructure as are roads but, alas, I am digressing. That is not the issue.

Sitting suspended at 1 p.m. and resumed at 2 p.m.

Mr. Staunton

I had more or less finished before the Adjournment. Between the time of the debate in the Dáil and the debate in this House the major difference is the fact that the Minister in his speech is able to announce the signing of an agreement with the Irish Congress of Trade Unions. That is highly satisfactory. If the unions are running with this new approach, if it has their support and that of their members it will get this company off to a good start.

I note that in the agreement the Government have confirmed with the unions that the objective for the next five year period is the retention of all existing B & I shipping routes. This means that a company with huge financial reserves must be the company carrying out this operation because you cannot retain existing shipping routes if they are going to start losing a great deal of money and that leads to another question. Another objective is the provision of excess capacity for the M.V. Leinster which is a very old ship, an improved vessel to replace the M.V. Munster which will cost a great deal of money, an upgrading of facilities throughout B & I which is absolutely necessary, replacement of its container ships, the provision of long term sustainable employment and share ownership.

The entire issue for me is not the money the State is paying. It is important from the State's point of view that it can get out of having to fund each year the debt for this company. It has to be absolutely satisfied the ICG will have the financial capability to do this job over the next few years.

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

May I thank all of the Senators who took part in the debate. I listened very attentively and learned from what they had to say. A number of specific issues were raised and I will deal with them very quickly.

Senators Doyle and Norris advocated that we hold a golden share of suggestion that might be worth considering. The concept of a golden share entails some Government control for strategic reasons but the Government came to the conclusion that was not a practical proposition in this case. Our primary concern was for capacity and competition. If a change of ownership were to operate at any time so as to restrict competition the Government would not hesitate in any way to use the substantial safeguards that at present exist under European Community and national law. We do not have to own the shipping line in order to influence it and to ensure that safeguards are there for competition and for capacity.

Another reason that I would not be inclined to go the golden share route was that it would certainly have lowered the price. You would not get the same price for a company if the State was hanging in there to an extent. These were the two reasons I rejected the golden share option.

All I can say today is that I have taken careful note of what Senator Norris said in regard to Irish Shipping. That is currently the responsibility of the Minister for the Marine and I will draw the comments to his attention personally.

Senator Doyle raised the issue of EC funding for the B & I and asked whether this would be against the competition rules of the EC. That is a very timely question and a relevant one now and it is hard for me to answer it in full because the EC have not yet replied to our application for the use of Structural Funds for mobile assets. The Senator will appreciate the EC does not aid mobile assets and we have applied to them to reconsider this.

The EC Commission normally takes a fairly jaundiced view of any aid to State companies. It does so on the grounds that such aid could be regarded as a subsidy and, therefore, contrary to the Treaty of Rome. While I cannot say whether it would have taken such a line with the B & I we can reasonably assume that the Commission will be more favourably disposed to private sector companies given their antagonism to State aid to the private sector.

Our approach to the EC is based on trying to get them to support mobile assets, ships and so on, and to do that as an exception for Ireland because of its peripherality and the fact that our sea lanes are our roads, in the same sense that roads between Germany, France, Italy, Portugal and Spain, connect their nations. The EC Commission is still considering whether to change their approach to that. Right now it is not in favour of aiding mobile assets and that is why I wanted to dampen down that expectation because I am not sure whether it is actually going to materialise at the end of the day.

Senator Doyle also asked whether there existed a performance clause in the sale agreement with the Irish Continental Group. The position is that ICG will pay the purchase price of £8.5 million on completion of the sale and the terms are along the lines that if the 1991 trading profit falls below £2 million then the purchase price will be reduced by the amount of the shortfall subject to a minimum purchase price of £7.5 million. In other words, the price is £8.5 million but it could go down in very exceptional circumstances — circumstances which are envisaged by hardly anybody — to £7.5 million. The B & I are currently projecting an operating profit of £2.4 million and in the Dáil Opposition Members were very determined in their view that the company would make substantial profits. Therefore, I do not see any reason why the £8.5 million should end up as £7.5 million. I am quite confident the £8.5 million will be the figure.

Some other Senators raised the question of liabilities remaining with the Exchequer. There are two indemnities, two undertakings, which we have given. One of those relates to the m.v. Kilkenny. That, you will recall, was the ship that was involved in the accident. It provides for an indemnity against any net liability to the company after taking into account all related insurance and claims against third parties. The second indemnity relates to a legal claim against B & I and, again, this was raised very forcibly in the Dáil in particular. As I told the Dáil on that occasion, the solid advice I have from the Attorney General's Office is that under no circumstances should the case be publicly discussed at this time. He has indicated to me quite clearly that this case is sub judice and asked me to take very careful note of that, which I have done.

Mrs. Doyle

We cannot afford any more Ministers in jail over Christmas.

An Leas-Chathaoirleach

We will not discuss the whereabouts of Ministers over Christmas.

Mr. S. Brennan

There is collective responsibility in that matter. Certain warranties are being given to the Irish Continental Group as part of the share purchase scheme but I want to tell the Seanad that every reasonable step has been taken to ensure the greatest possible protection for the Exchequer.

I want to thank Senator Dardis for a very constructive contribution also. He raised many points with which I concur. His analysis was very accurate. Senator Harte stated that the Danish backers of the management-staff buy-out pulled out because they did not have enough time. That is not the case. When Stokes Kennedy Crowley spoke to the Danish backers of the consortium on 2 October, they said they only required two weeks to make a final bid. They had already been associated with the previous bid a year earlier and their partners in the consortium were the company's existing management. On 21 October the chief executive of B & I informed me that he could have a firm and final bid with me on behalf of the management buy-out consortium within three weeks and, as I explained earlier, in all five full weeks were given. That was more than adequate, considering that I was basically dealing with the same people who had been involved 12 months previously and who, therefore, had a very thorough working knowledge of the company. My main point in regard to that is that they got more time to prepare the bid than they actually asked and any suggestion that I rushed them does not stand up.

The Government are disposing of the B & I largely because they simply do not have the resources necessary to fund its future development. Irish Continental Group's planned investment programme was one of the strongest planks in their offer. The company have drawn up a detailed plan of investment of about £30 million over the next five years. That is very significant investment indeed and it is desperately needed in the B & I line.

There are many advantages to this sale from the point of view of the new organisation. In the first place it will put together now a strong Irish shipping group which will employ a total of over 1,000 Irish people; that is after the nationalisation has been worked out. Secondly, the sale will serve to maintain and develop shipping routes for national tourism and trade needs. The central corridor is particularly important in that context. Thirdly, the new entity now setting sail will create a platform for increasing capacity and improvement in access. Fourthly, the sale preserves and maintains vital Irish maritime skills.

One point which Senator Doyle put to me which seemed to be a central point for her was an inquiry as to why I did not hold on to the company and sell it a couple of years later when it might be more profitable. The answer to that is that it needed more than cash. It needed an injection of fresh enthusiasm, it needed a fresh approach. The Senator asked me very specifically why I did not hold on to the company, take out the debt at this time, let the profits roll in and then I would get a much better deal. I thought about that obviously but there were a couple of reasons why I rejected it. First, the profits are not guaranteed. If you look back on the history of the line over almost 30 years, there are not too many years in which they recorded a profit. Therefore, I could not put my hand on my heart and say: "The bad days are over. Now they will definitely earn profit because they do not have the debt." The debt was built up. It was not always there. The profit was by no means guaranteed.

Mrs. Doyle

The last four years have been all right.

Mr. S. Brennan

It is coming right. However, I did not have the confidence fully that if I took away the debt completely and left it to basically the same structure that they would have the capacity to turn in those profits without some fresh injection of management enthusiasm. In other words, the solution of just putting in money and leaving it to all the same structures to operate seemed to me to be too one-sided. I felt that putting the money up was part of it but I also needed to restructure. I do not want in any way to denigrate the existing management and workforce but when you are starting something fresh you need fresh faces, fresh management and fresh enthusiasm. I would not be sure that if I kept it in State ownership as suggested, that I would not be asking the Oireachtas for additional funds for it in a couple of years time.

It is a matter of judgment whether you cut your losses and give it to fresh management to run or whether you hang in there and hope the market will rise and get a better price. I do not suppose anyone will ever be able to answer those questions in any business deal, but given that the State had put £106 million into the line, that at the end of the day it had two ships to show for it, that the consultants suggested we might need a similar kind of investment over the next decade, fresh money and fresh management seemed to me to be the correct approach.

My thanks to Senators for their very constructive approach to this important legislation. I would like to conclude by wishing the new organisation, Irish Continental Group and B & I together every success and in particular to take this opportunity to thank the Irish Congress of Trade Unions and the group of B & I unions for their generosity of spirit in difficult circumstances in agreeing to give the B & I a fresh start and to set sail once again. I wish it every success.

Question put and agreed to.

Agreed to take remaining Stages today.

Seanad Éireann debate - Thursday, 19 Dec 1991

B & I Line Bill, 1991: Second Stage.

An Leas-Chathaoirleach

Seanad Éireann debate -
Thursday, 19 Dec 1991