Vol. 146 No. 18
Section 3 states:
The Minister may, with the consent of the Minister for Finance, pay to the company a sum not exceeding £15,028,500.
Will the Minister explain the reasons for this? I know that a loan of £17 million must be discharged. On Second Stage we discussed implementing works which are necessary from an environmental point of view. Is section 3 relevant to this?
Senator Cregan's point is valid and relevant to the environmental works. He referred to the outstanding loan of £17 million which is being written off under section 2. The sum of £15.0285 million in this case consists of a number of different elements. There is a provision of £2.36 million to fund necessary environmental and other remedial works which were identified during the due diligence process. A sum of £2.831 million has been provided for charges and expenses identified by ISPAT International during the due diligence process which should have been included in the balance sheet of Irish Steel for the 12 month period ended 30 June 1995.
A sum of £192,500 has been provided to finance a matching contribution from the Exchequer towards a staff training grant under Article 56.2 (b) of the ECSC Treaty. A sum of £7.2 million has been provided to compensate the company for restrictions on production and sales imposed on the Irish Steel-ISPAT International project for the next five years to overcome UK objections and to ensure unanimity among all member states of the EU under Article 95 of the treaty.
Members will know this relates to negotiations with the British Government and the amount is essentially to compensate ISPAT International for the restrictions imposed on it in terms of sales to the European market and the capacity ceiling. The last payment is to provide an up front cash payment in lieu of indemnities in respect of possible residual taxation and other costs.
I appreciate what the Minister has said but I understood environmental works were to be carried out. Members will understand the problems in the Cork region where environmental groups constantly made complaints. Many jobs were lost because of these complaints, which were probably genuine in some instances. I understood the State would carry out the environmental works rather the company. I did not know that over £2 million was being paid to the company to carry out these works. Are we happy that this amount must be paid? This steel plant is relatively elderly and it is located in a part of the port which is important in terms of the water system. I am afraid the works may not be to done to our satisfaction if they are taken out of our hands. I know there are environmental structures through which such matters can be investigated. As I said, having listened to the Second Stage debate, I was under the impression that the State would carry out these environmental works rather than the company. I will discuss later the other money being given to the company.
My understanding on the advice available to me is that a considered provision and that everyone concerned is happy about its adequacy. In terms of the amount of money being provided, there is no question that the environmental and remedial works carried out will be adequate to meet best environmental requirements.
I will take the Minister's word that ISPAT International is best placed to undertake the environmental works needed. However, I was under the impression on Second Stage that the State would carry out the environmental works before the company was handed over. We are spending £10 million more than we anticipated last September. As regards the £7 million being spent because of restrictions on business required by one member state, is there any way we can recoup that money back from the EU? I do not see why we should pay this money to the company.
I am aware of how well this company works and how it can turn businesses around in a short period, which I hope it will do in the case of Irish Steel. Every possible assistance should be given to protect the 300 in the company. However, it is embarrassing that we must pay an additional £7 million to subsidise this company because one nation wants to restrict production at Irish Steel, a relatively small company compared to those in Britain.
On Senator Cregan's first question, I think I can assure him that he need have no concern about the people, as he puts it, being satisfied about the quality of the environmental and remedial works which are to be put in place. ISPAT International is required as part of the agreement to do this in consultation with the local authority and I am sure Senator Cregan would agree that the local authority is best placed to make a judgment on what is acceptable locally from the point of view of the environment. The work, of course, will be carried out over a period and no doubt there will be ongoing discussions, etc., and resort to the technical and professional expertise of the local authority.
On the second question which Senator Cregan raises, it may not be quite true to say that the opposition of one member state has cost us an additional £10 million but it has cost us in excess of £7 million. Indeed, it is a painful penalty for objections which, in my view, were not sustainable. I do not believe that the argument made by the British Government was well founded but the reality is that the agreement before you is the best which could be secured by my colleague, Deputy Richard Bruton, who, with his officials, devoted an enormous amount of time to it.
Whereas there is a penalty, in the wider scheme of things, our disposition is that this was necessary in order to conclude the agreement. Unfortunately, the question of us being able to recoup this amount elsewhere within the EU framework does not arise.
This Bill is entitled "An Act to provide for the making by the Minister for Finance of certain payments on the sale by him of his shares in Irish Steel Limited and to provide for connected matters.". With the permission of the Chair, I want to raise the question of Butlers Engineering Limited, Portarlington, County Laois, outline the situation there and ask the Minister to assist this company because it would form part and parcel of Irish Steel Limited's market. When Irish Steel is back in business and going well it is important that they have Irish companies which would utilise its product.
The Minister is probably aware of this because I have been in touch with him——
Is it relevant?
It is because it is a connected matter. Irish Steel Limited will need markets and the largest steel company in Ireland is Butlers Engineering Limited, Portarlington. This is important.
I know it is important but is it relevant?
It is relevant. This company is one of the major steel companies, not only in Ireland but in Europe. It was set up in Portarlington with the sole intention of being one of the bigger producers, manufacturers and distributors.
With respect, I ask the Senator to keep to the business before the House.
We have among the most modern and up to date plants and equipment. These steel works employed approximately 140 people and the receiver, Mr. Ray Jackson, has reengaged 70 people. I am anxious to know whether the Department can assist some of the people who applied to purchase this company. There are about 20 inquiries at present but I understand they are narrowing down to the serious purchasers.
It is important that, with Irish Steel Limited, we would have some company which would utilise and benefit from its production. This firm, situated in the middle of Ireland, has been able to sell its products in Britain but, unfortunately, it has been placed in receivership and is in serious financial difficulty.
I appreciate the support I received from the Minister of State on this matter. When we arranged meetings with a number of people from the firm he was most co-operative. I want him to bear this company in mind. These 70 people were re-employed because the company is completing one of its major contracts in County Kildare. Any assistance the Minister can give would be most helpful.
Obviously I share Senator Enright's concern about what has happened at Portarlington. It is a significant steel fabrication plant in Irish terms. It is a tragedy that losses in excess of £20 million were run up before we reached the stage which, unfortunately, led to the appointment of a receiver. The task of the receiver is to attempt to rescue the company and dispose of it as a going concern. That is difficult, obviously, in the context of the extent of the accumulated deficit.
There is no doubt but that there is a market niche for a company with the proven expertise which is in the ranks of Butlers Engineering Limited. I assure Senator Enright that, as far as is possible within the mechanisms which are available, the Department would be willing to do anything it can to assist the retention of the optimum employment at Portarlington. To some extent, it is outside of the Department's control in so much as the receiver has definite parameters within which he must operate but it is extremely regrettable that good employment in such an important company should be put at risk. I am aware there is great concern in the area about the future employment prospects of the workers concerned. If there is any pragmatic way in which the Department can help, it will.
I do not wish to hold up the proceedings so I will speak on the matter once. While the Minister agrees that one member state has reduced steel exports from Ireland to the EU, it is still disappointing to hear him say that. The Minister may say there are no avenues open but it is very serious that the State must spend over £7 million, which was not part of the initial deal, because one nation decided to limit the production in a small Irish plant. In comparison British plants, which rationalised over a 15 year period, are now producing more steel than ever thanks to the EU regulations and recommendations. The State must now give more than £7 million because production is limited in order to save 300 or more jobs. The EU is demanding a reduction in steel production in general. Is there any other avenue open to us? Can we make an ongoing argument? I am not saying we should hold back the Bill but this should be noted.
I know the Minister's feelings on the matter and those of the senior Minister, Deputy Richard Bruton. I am also aware of what they both went through over the last 16 months. At the same time, should the other member states not allow this State to spend extra money? Is there not an argument being made today in Brussels for avenues to be opened to protect Britain's beef industry? After all, the British beef industry is in trouble because of mistakes made. We are not making mistakes; we are rationalising Irish Steel by reducing staff numbers from 1,000 to 300 people to ensure it stays open. However, Britain wants avenues opened to protect its beef industry, whose problems came about because of their own mistakes. Does the Minister agree with me?
I do not accept the validity of the arguments advanced by the British Government and the Minister concerned, Mr. Eggar, at the time. Its arguments have no validity. One could discuss for a considerable time the real motivation behind the position adopted by the British Government, but that is history. The best feasible deal was secured on behalf of the Irish taxpayer.
It is regrettable that an additional penalty in excess of £7 million had to be paid, but the price was dictated by the requirement of unanimity on the Council of Ministers. A Minister representing one member state could not agree to what seemed a reasonable arrangement to the other 14 member countries and because of that requirement we felt there was little other choice if we wanted to secure the deal. In so far as anything can be assured in this business, we seem to have secured a sound future for Irish Steel and the overwhelming majority of its workers and we should conclude this agreement with optimum dispatch.
I understand and share Senator Cregan's chagrin, but the realpolitik is that we had little choice. The beef or any other matter notwithstanding, there is no avenue open for us to recoup these moneys.
The figure in section 3 may have increased by up to £9 million because of this arrangement. It may be a case of the tail wagging the dog. It is unfortunate and we cannot just put it down to history. There has been a constant historical problem between ourselves and Britain and we should not allow it to continue. It is unfair if we are forced to pay this penalty and I ask the Minister to find some way of avoiding it. There is no reason why we could not use a similar argument to that used by our Commissioner in regard to the savings made in regard to beef last week and tell him to find out why one nation can control the production of one of the smallest steel plants in the EU. This money could provide up to another 100 jobs in the next five years. Will this restriction last for five years, for all time or until such time as we can change it?
Section 4 (1) states that "The Minister may, for the purposes of this section, cause an account to be kept at a credit institution". If we pass a Bill that privatises Irish Steel, will this joint account continue in the Minister's name and, if so, which one? Section 4 (2), which states that "Moneys may be paid out of the said account until such purposes and in accordance with such terms and conditions as may be agreed upon by the Minister and the purchaser." is also vague and I ask the Minister for clarification on those points.
This point is a complex matter. Its genesis lies in two outstanding loans to this company, one from the European Coal and Steel Community in 1979 and the other from the ACC in 1993. The £4.617 million provided for, to which Senator Sherlock drew attention, is the interest accrued. That is being put into an escrow account in the event of default so the moneys will be there. The Minister named in the section is the Minister for Enterprise and Employment. It may be a complex mechanism but its purpose is to provide that if they were to default, the loans would revert to the Minister.
What would have happened if this company had gone into liquidation because of those loans or was any effort made to try to reach a reduced settlement figure? Those loans would have been useless if it had gone into liquidation.
Irish Steel came very close to the precise circumstances Senator Fahey envisages; it might well have happened. This eventuality was examined carefully. However, both these loans were guaranteed by the Government. In that event, I cannot see any way where the Government would not be liable to discharge them in the event of liquidation. In the case of a formal liquidation and a liquidator being appointed, the normal rules would apply. However, this guarantee is on the books and it would be difficult to see how these loans could be written off; I do not believe it would be successful.
Irish Steel came close to liquidation. The only reason it did not come about was due to the workforce, management and chairman who took over the handling of the company. One can get a full settlement of moneys owed in receivership and liquidation situations because a letter of commitment from the State confirms that every pound will be paid. Could we have saved money if Irish Steel had been liquidated?
Is the Minister happy with the disposal of that State asset to the private sector?
I promised to give Senator Fahey a full answer to that outside the parameters of the Chamber. If he will meet me for a cup of coffee afterwards I will tell him my views on that issue in some detail but, for the purposes of the record the answer is yes.
Senator Cregan asked whether we would have been better off with a liquidation or receivership. Much blood was spilt avoiding that situation for a variety of reasons which are well known to Members. Liquidation would be an expensive option for the State. The State has guarantees and the outstanding loan and would consider itself to have a liability to the workers who would be made redundant. Liquidation would therefore have been a similarly expensive exercise.
The objective was to maintain employment at Cobh and it has been an extremely difficult objective to realise. One sincerely hopes, now that it has been realised, that everybody engaged in the enterprise at Cobh will make the best of the new situation. A company of some international standing has taken over Irish Steel and one hopes that everybody will put their shoulder to the wheel to make sure it is a success. Otherwise, it will have been an admittedly painful exercise and an expensive one for the taxpayer, as it has been traditionally. There is no point trying to avoid that answer, but it does have some strategic significance in the Irish economy. The location at Cobh is of some significance for reasons the Senators present will know and the overriding objective was to secure employment. Happily, that has been done, but it clearly has been done at a price.
When discussing the payments of money and agreements on shares and loans, we should remember the amount of rationalisation which took place. The Minister is well aware of the arguments which took place in SIPTU and other trade unions about rationalisation. It baffles and annoys me that we tried to get an agreement to ensure the workforce did not have to leave but they still had to leave. People who were committed to Irish Steel for a long time are now working harder and for less money than they were getting two years ago.
We are handing over something that has been the subject of expenditure and rationalised and upgraded to such an extent that it will be a plant of high technical advancement for the future. I am delighted with that, but I do not want to welcome it without mentioning the loss of the workforce in Cobh and other parts of the region. These people put much into Irish Steel over the years and have ended up with less because other people can dictate to us.
We would have been in a marvellous position last March or January if we could have spent another £7 million or £7.5 million to ensure the proper thing was done. Last October, November and December we had to come up with the idea to get a proper deal and we needed to spend another £7.5 million because somebody else said we could not get a deal. It annoys me that so many people had to lose their jobs or work more hours for less money than they were earning two years ago. It is a sad reflection on us that we could not see that in the future. It should go not unsaid. It is a bad situation that we had to spend so much money just to please somebody else and not just the work force.
Not just consign it to history.
I would not consign it to history.
I understand Senator Cregan's frustration. I appreciate that significant sacrifices were made by everybody at the plant, especially the workers. It is not the most pleasant job in the world at the best of times. It is a difficult task and the workers concerned made significant sacrifices, which should be acknowledged. It is probably appropriate to mention that the management of the enterprise may not always have been as good as one might have liked. However, that is history now and it is fair to say that the rationalisation which took place was necessary if we were to make Irish Steel an attractive proposition for the kind of leading international company that is coming in there now. I hope the synergy of the local workforce and a company of international standing will mean that the exercise will have been worth while.
This section deals with the protection of the workforce, which is very important in light of what has happened in Irish Steel over the years. I want to ask a few questions to ensure the staff generally are well protected. There is a danger here, of which Senator Sherlock will also be conscious, in the use of the word "trustees". While in theory the word "trustees" sounds very well, there are situations throughout the country and in local communities where trustees dictate and the general group may not have a say.
It is agreed that £628,000 will go into the pension fund. I would have been delighted if some of the £7 million could have gone into it. We discussed the protection of the 300 staff on Second Stage and we were promised that it would be itemised on Committee Stage. Is there a commitment over a five year period as regards the pensions and protection of the 300 people working there?
The moneys we are talking about are designed to make up a shortfall or deficit in the staff pension fund. It covers only the segment of the workforce in the staff category, not the workforce generally. The reason the moneys will be paid to the trustees is to draw a distinction between the trustees and Irish Steel/ISPAT. The moneys will not be paid to the company Irish Steel/ISPAT but to the trustees, who will invest that money on behalf of the members of the staff pension fund. Senator Cregan asked about assurances. All existing liabilities and commitments will be honoured by ISPAT.
Some of my queries may have been raised already. I will avail of the opportunity to ask about the five year period. I take it that with the record of ISPAT in the international business world, the investment in Irish Steel at Cobh and the retention of 300 jobs there is not for a five year period but long-term. I would like to have it confirmed that it is a long-term investment because the question of five years could create some confusion.
On section 5 the explanatory and financial memorandum states:
The purpose of this section is to enable the Minister for Enterprise and Employment to make a once off payment [of £628,000] to the trustees of the staff pension fund of Irish Steel Limited in respect of a deficiency identified during the due diligence process.
That should be explained. I do not understand much of this terminology but I would like to know what transpired in that due diligence process that resulted in a shortfall of £628,000 which the State has to pay to the trustees. I have no objection to that but these matters need to be clarified before the Bill is passed.
I welcome the pupils from Banbridge, County Down and I compliment them on their appearance.
They are very welcome. The sum of £628,000 being paid as a result of a deficiency identified during the due diligence process is questionable. Irrespective of whether people are staff or general operatives they are workers. Senator Sherlock may not agree with me but, looking at the section, a commitment was given that 300 staff would be guaranteed work over a five year period. I am not saying that it should only be five years because, as I said on Second Stage, I want to see 400 or 500 people working there after five years.
Can it be said by virtue of the section that we are availing of these avenues? Because of Irish Steel Limited's deficiencies in not paying £628,000 by a due date, can the staff avail of AVCs? While staff members are paying tax and general operatives may not be, can we, with the Minister for Finance, provide an opportunity to see what benefits can be given to these people seeing we will be giving it to the company?
We cannot give the staff or workers shares now because we are selling all the shares. Every avenue should be opened to see whether money paid out on our behalf can be used for tax benefits or AVCs. I do not know how many staff are involved in the pension fund, but can they avail of the extra 15 per cent per year to gain the tax relief on it? That would be very helpful and they should be advised about it.
Senator Sherlock is right. The intention is clearly that the new arrangement being entered into is not merely for a period of five years, but five years is the period to which ISPAT is contractually bound in terms of maintaining a certain level of employment and honouring certain conditions and commitments. It is the intention of both contracting parties that it will, hopefully, be the beginning of a new existence for Irish Steel and a productive and profitable one for all concerned.
I understand Senator Sherlock's concerns that this should be spelt out. He has made representations to me on a number of occasions on behalf of Irish Steel workers during the crisis there. I understand the wish of people in Cobh to be assured, in so far as anybody can be assured, that their future employment is secure. If a company with the reputation of this one cannot carve out a niche in world markets, as well as the ceilings provided for within the European Union, then it is unlikely that any other arrangement could do so. The contractual terms commit the company to five years but the hope is that it would be for longer than that.
Senator Sherlock asked about due diligence. This is part of the normal professional procedure required in the purchase of an undertaking of this size. The professional people were sent in to ensure that everything was as it seemed and that there were no pitfalls. A deficit in the staff pension fund was uncovered. I am not sure precisely why it arose but unfortunately, it is not uncommon, especially where the trustees are not broadly representative, as Senator Cregan said, of the members of the pension fund, it is simply not funded by default. It is an expensive item and a company living under some financial strictures finds it a convenient way of avoiding making a payment sooner than they have to.
I do not think the money being injected here has any significance other than making up that shortfall. The AVC facility to which Senator Cregan adverts is not relevant in this context. However, if the Senator thinks he has stumbled on something that can make it more tax efficient for those concerned, I would be happy to take expert advice on it. My opinion is that this is no more than bringing the fund up to the level it ought to have been at, and that members of the pension fund will benefit from that in accordance with the pension scheme's rules when the time comes.
I appreciate the Minister's reply and I know he is well informed about pension structures. The word "trustees" worries me. I would be the first to ensure that every employee is properly covered because it is so important for their future employment. Perhaps we could insert a wording that would grant protection to the staff generally rather than to the trustees of the staff pension fund. Could we say payment "to the staff pension fund" rather than "to the trustees of the staff pension fund"? We should not be afraid to look at that area because trustees can take control. We have seen that happen in many areas.
Seeing that money is being paid in because of past deficiencies, can we make sure that every possible tax benefit is granted? Obviously, if we are paying money into a tax fund it is divided by the number of staff who are there. While they may not be able to avail of it for 1994 or 1993 or since the deficiency occurred, I see no reason if the Bill is passed before the start of the new tax year, why the staff cannot avail of the AVCs for 1995. We should not be afraid to examine this opportunity, particularly for 1995, provided of course that the legislation is enacted before the end of this tax year.
I might be going too far here; I hope not because I do not want to insult anybody in Irish Steel. But for far too long there was a situation where a few were dictating to the staff pension fund rather than to the trustees of the staff pension fund.
I can reassure Senator Cregan. I have expressed my view on the question of the AVC's and if it is otherwise I will come back to him on that. In regard to the trustess in this case, we are talking about a very small number of people and the trustees are representative of the people concerned. The terms of the pension scheme itself and the general provisions circumscribing it provide that the money must be invested for the purposes stated by the trustees. There is no question but that the benefit will go as intended. The purpose is to make up the shortfall.
If the Minister is so happy that the trustees of the staff pension fund are so good, how did the deficiency occur in the first place?
As I have indicated to Senator Cregan, this kind of thing is not unusual, unfortunately. Neither is it unusual either that the due diligence process would uncover it. We are simply providing here that when people become entitled under the provisions of the pension scheme to avail of its terms, the money is there to fund their pension entitlements. The money is going toward that purpose.
This is a purely technical amendment. The shares are actually vested in the Minister for Finance but the person making the payments referred to is the Minister for Enterprise and Employment.
The introduction of this legislation by the Minister, a member of Democratic Left, is a historic occasion. I refused to have a cup of coffee with him to discuss the ideological difficulties that he has with this Bill but if he offers me a bottle of brandy, I will certainly share that with him.
I cannot let this opportunity pass without saying in a lighthearted way that I recall some years ago bringing in legislation to make some minor changes which involved a minor transfer from the public to the private sector. The Minister tore me apart for this minor change. I have to smile when I see the Programme for Government which states that this Government will retain majority State ownership in State companies. It also states that change in State companies will be managed in the best interests' of the employees. I cannot let the opportunity pass without complimenting the Minister. The wheel has turned so much that for the first time an entire State company is being transferred from public to private ownership. I wish Irish Steel, its management and its employees a bright and sucessful future under new ownership. I agree with much of what Senator Cregan said. Irish Steel will have a very bright and successful future.
The word "may" runs right through this Bill. It may not be important but it struck me nonetheless. While listening to Senator Fahey the thought struck me that had there been due diligence by previous administrations we would not have had one worker in Irish Steel for every three managers, who were mainly political appointees. We might not have had a situation where Irish Steel almost went down the Swanee.
I wish to make one brief comment. We have followed the debate all the way along over the last few years. Let there be no doubt about the fact that the investment in Irish Steel was a good investment by the State. It is the only steel industry in Ireland and the company has a very diligent workforce. I am confident that ISPAT will be able to turn around Irish Steel and that the company will be able to harness the proven record of the workers and establish itself a good market. Great credit is due to the Government and in particular to the Ministers, Deputy Richard Bruton and Deputy Rabbitte. The negotiations were very delicate, with constant British interference and the end result is what we want.
I wish to be associated with Senator Sherlock's remarks. This legislation looks to the future. It looks to the Cork region and to our steel works for the future. I welcome that. I am saddened in many ways because I was directly involved in the number of people who lost their jobs in Irish Steel through no fault of their own.
The Minister, the Minister of State and the staff of the Department deserve credit and should be complimented for the way they handled this delicate matter, particularly last October, November and December. Many people, including departmental officials and the work force, were worried over the Christmas period about the situation in Irish Steel. I compliment the Minister of State for his thinking in the Bill and I commend all those involved. I wish the company, ISPAT, and the workers a positive future and I hope the strength of the work force will increase from 300 to 500.
I support the sentiments expressed by my colleagues and I thank all those involved, including the Minister, the Minister of State, the departmental staff, the management and the work force, in saving the company. Despite some of the criticisms expressed, it appears Irish Steel has a bright future and I concur with Senator Cregan in hoping that the number of jobs in the company will increase in the future.
I thank the Members for their co-operation in bringing a phase of Irish industrial history to an end. Senator Fahey is correct; this is an historic occasion, but for reasons entirely different from those mentioned by him. It is the end of an era in Irish industrial policy and I hope it is the dawn of a new era for the workers in and those sustained by the Irish Steel plant at Cobh.
I thank the Members for their diligent attention to the Bill and for expediting it through the House. In particular, I thank the officials in my Department who put a great deal of painstaking and attentive work into bringing the matter to this point and hopefully to a successful conclusion in the other House as soon as possible. I reiterate my offer of a coffee to Senator Fahey. If that is not sufficient to attract him, I can arrange to put something stronger in it.
Although not poisonous.
The Senator's support for my amendment augurs well for the future structure of Irish politics.
I would not bet on that, Minister.
I have an open mind on these matters. I thank the Senator and the Opposition for facilitating the passage of the Bill.
